The Administrators of Rangers, Duff & Phelps, released their “proposals” to creditors on 5th April. The full document can be read here Duff and Phelps Proposal 5 April 2012.
It was packed full of interesting details, and if D&P had been able to sell copies it might have helped keep Rangers going a bit longer!
I wanted to have a look at the finances and how D&P can keep Rangers in administration and out of liquidation, on the basis that there are no home games for them until 2nd May.
Pages 43 and 44 of the document contain the receipts and payments accounts for the period from 14th February to 30th March.
The cash balance of the company had fallen from £3.3 million when D&P too over to £931,800 by the end of March. How likely is it that Rangers can make it to the end of the season, or indeed to their next home game?
Whilst the administrators have the power under the Insolvency Act to borrow money, or raise it by issuing shares in the company, whilst the company remains in such an uncertain position, both as regards its future and in terms of the security position, no one sensible would lend to Rangers or invest in the existing company. Therefore it has to make do with what it has, and what it can put in the till.
Let’s look at some of the areas.
During that time Rangers had three home SPL matches together with the Rangers v Milan “charity” match. They also played two away games in the SPL.
Ticket sales are stated to be £708,958. However, that figure includes the sale of tickets for away games, which are remitted to the away team with Rangers deducting a 5% fee for “managing” the sales. The figure paid to clubs for away tickets in the period is £195,932.
Therefore the net income from sales of tickets is £513,026. This includes a sum of just over £10,000 representing Rangers admin fee for selling away tickets. Therefore the net ticket sales for home games are £503,000. Bearing in mind the average costs of a ticket for Ibrox seems to be around £25 or so, then this represents approximately 20,000 tickets over the three games, and as these include away fans, it does not seem to be very much of an income.
If we take it that Rangers therefore sold on average £170,000 of tickets for each home game, and makes £5,000 per away game, this means that the ticket income from 31st March to 1st May (the day before the next home game) will be (roughly) (1x£170k) +(3x£5k) = £185k.
However as this is a receipts and payments account we are working from, if the payment by Celtic for the 25th March game arrived post 30th March, then it would not be included. That adds another £300,000 to the coffers.
There does not also appear to be any account in the figures of the receipts from the charity match.
According to the Rangers website, the game raised £280,000 for the club, with £170,000 going to the two charitable organisations, namely the Rangers Charity Foundation and AC Milan’s Charity. As the changed arrangements for the match meant that the club was keeping the revenue, and making a donation to charity from it, there should actually be a figure of around £450,000 added to the pot, with £170,000 to be put through as a payment.
Let us work on the basis therefore that none of the takings for the game is included in the receipts figure (which seems odd, but let us be positive).
There is £450,000 to add in, with the £170,000 to be deducted.
Therefore, in terms of extra money to be added to the balance, we have a net total from ticket sales as follows.
Gate receipts for 1 home game and 3 away games £185,000
Payment from Celtic £300,000
Net proceeds from Charity match £280,000
Total Net Ticket Sales £765,000
The additional trading income of programme sales, hospitality and food and beverage sales in the figures is applicable to the three home SPL games played. They total £153,000. This works out at £51,000 per match.
During the period from 31st March to 1st May, there was a home SPL game and the charity match. I will assume that none of the takings for that is in the accounts so far. I will also assume that such income for the charity game is over and above the declared figure for sales.
On that basis, there is an extra £102,000 to add to the pot.
Finally there is “other income” and stadium tours totalling just over £58,000. Let us assume that is repeated over the period we are looking at.
Therefore the sum of £160,000 is added.
How Much is in the Pot?
On these rough figures therefore, as at 1st May, Rangers (IA) bank account would have around £1,860,000 but only if no bills at all of any sort were paid (which might have been the modus operandi of Mr Whyte, allegedly, but cannot be that of D&P, as regards current debt.
What Will D&P Spend between 31st March and 1st May?
The receipts and payments account lists a lot of payments out under different headings. Some of these are trivial, such as £164 for stationery and £97 for fuel, whilst others are far more substantial.
It looks as if two pay runs are included in the 14th February to 30th March account. There will be one more by 1st May.
Is it possible to assess how much they still have to pay?
Wages and Salaries
The account produced shows a pre-administration figure of £479,513 and post-administration total of £1,208,986.
I have broken them down as follows. Let us say the pre-admin wages cover two weeks. That amounts to roughly £240,000 per week. That rate of pay continues until 9th March, when the players agreed the wage reduction strategy.
Therefore wages are running at £240,000 per week for the four weeks till 9th March.
This leaves a balance for the remaining three weeks of £210,000, or £70,000 per week.
That calculation, rough as it is, shows a weekly saving in wages, even before we calculate reductions in PAYE and NIC, of £170,000.
Therefore, in April, D&P would be spending £280,000 on wages.
We see that there is a total of £595,953 in the accounts under this heading.
Because the PAYE on the March wages is due to be paid by 20th April or so, this figure will not fall as much in April as we might expect. The staff was on full wages for almost 1/3 of March.
Taking a broad approach therefore, the figure to be paid for PAYE and NIC in April might be around £300,000.
The accounts show payments out of £541,507 for catering and food and beverages. Bearing in mind that the income from these was £138,000 that seems remarkable. Did Rangers lose £400,000 on sales of food and beverages over the course of three games?
Luckily they only had two games for the April period we are looking at, and therefore pro rata this sum would fall to £360,000. That still seems very high, and perhaps is an indication that the pies for the charity match had to be paid for up front!
If the monthly payment out for food was higher than the wage bill, that would seem very odd, but these are the costs in the books.
I have left out of account the £195,000 paid to teams for away tickets, as I have added in the net proceeds for Rangers of the sales.
Policing costs are shown as £204,538 for the period accounted for. We will take this as £100,000 for the two matches at Ibrox in the period to the start of May.
Facility costs, stated at £86,934 are, pro rata, reduced to £60,000. Lease and hire charges reduce from £106,224 to £70,000 on the same basis.
There is a charge for pensions of £28,030, reduced pro rata to £18,000 and £27,369 for software licences, prorated to £18,000.
This gives us deductions as follows
Police etc £100,000
Lease etc £70,000
Software Licences £18,000
Total Expenditure £1,222,000
So, Where Does This Leave Rangers on 1st May?
Based on the above figures and assumptions, the bank balance calculation is as follows:-
Initial balance £931,800
Add: Receipts – Ticket Sales £765,000
Add: Receipts – Other £160,000
Sub Total (approximate) £1,860,000
Less: Expenditure £1,222,000
Balance as at 1st May (approximate) £640,000
Good news! There will be nearly 2/3 million pounds in the Administration bank account working on the Trading figures!
What About May?
Put shortly, the calculation is as follows. Income – home games on 2nd and 5th May = £340,000.
Misc other income = £160,000
May’s deductions are as follows
NI/PAYE (reduced due to lower wages) £150,000
Police etc £100,000
Lease etc £70,000
Software Licences £18,000
Total Expenditure £712,000
This gives us the following up to the end of May, based again on the Trading figures.
Initial balance £640,000
Add: Receipts – Ticket Sales £340,000
Add: Receipts – Other £160,000
Sub Total (approximate) £1,140,000
Less: Expenditure £712,000
Balance as at end May (approximate) £430,000
Why Might This Not be Good News?
The calculation above is based on 3 major assumptions, any of which being wrong will reduce that figure further towards zero.
1 If the payment from Celtic for the Old Firm game is included in the Receipts and Payments up to 30th March, then £300,000 comes off the balance.
2 If any receipts from the “charity” match are included in the accounts, then the balance reduces by that amount.
3 I have not included the catering figure at all in the April expenditure. Of course, if it is again at the level shown in the accounts, £541,507, then the account will be in the red by the end of July, even if the other assumptions go in Rangers favour.
What About June? Season Tickets and Wages?
This month becomes even more fraught. Season ticket income, which normally tides a club over the summer when there is no income from matches, is unlikely to help much.
Either the fans will buy few season tickets, as there is no guarantee of there being a team, or what division it will play in, or if they do, much of the proceeds will be diverted to pay Ticketus, unless the administrators rip up the contract.
There are no matches played in June, and the wage bill will shoot back up as the players’ temporary pay cuts come to an end.
I have not included VAT in my sums. This is because the report shows that Rangers was running VAT neutral over the first six weeks of administration.
What About Rates?
No rates were paid by the administrators in the period referred to. This might be (a) because the club was paying over 10 months, and thus no sums are due in February or March, or (b) because the club pays in two instalments per year, in December and June.
Rangers rateable value for Ibrox Stadium is £1,916,000. Interestingly, Glasgow City Council lists the proprietor as “Rangers Football Club Ltd”. No such company exists!
The rateable value for Murray Park is £598,500. East Dunbartonshire Council lists the proprietor as “Rangers Football Club PLC”.
I will ignore other smaller properties Rangers own at Edmiston Drive. As a matter of interest, both rates revaluations are under appeal, and have been since 2010.
The national business rate is £0.45. Therefore, subject to reliefs, the annual rates bill for Rangers = £0.45 x (£1,916,000 + £598,500) = £1,131,525.
Therefore, by the end of June, the administrators ought to have paid, in total, either a six-month instalment totalling £565,762 or three monthly instalments adding up to £282,881.
Is There Extra Money from Anywhere to Counteract the Above?
The above figures only include trading income and outgoings.
Page 44 indicates the non-trading receipts and payments. For the six weeks covered, the administrators brought in £218,000 from debtors. However, this only left £320,000 more, and in the present economy, it is unlikely it will all be paid in full in the short term. For the purposes of illustration, we will assume that, in the period to the end of June the administrators are very successful and pull in an extra £240,000.
That would not cover the rates bill, even at its lowest.
Duff & Phelps have been touting the need for bidders to pay a fee to look at the books. It was publicised first of all as a £1 million fee, and then as a £500,000 charge. So far no one has elected to pay that, although it would keep the wolf from the door for a few weeks more.
The saving grace for Rangers might be its SPL prize money. However it is not clear to me from the SPL’s website when those sums are paid. I am trying to find out, although I am sure Duff & Phelps know (or at least I hope so!)
The problem here is that SPL rules permit the withholding of some of that money to meet overdue football debts. The report discloses at para 14.36 that football creditors (Scottish ones) are owed £1,063,082. That would make a big dent in any prize money!
However Duff & Phelps have forese the possibility of this happening. At para 14.39 they declare that if there is any offset applied, it “will be subject to legal review”. Talking of which, we come to…
Have They Paid Any Legal Costs Yet?
The report, at page 44, discloses legal costs paid in the first six weeks of administration of £129,294. An average of £21,557 per week!
There is no indication that the rate of legal costs will have reduced, and in fact the Collyer Bristow cases, of which more soon, will burn up costs at an even greater rate. Should Duff & Phelps try again to have the Ticketus deal ripped up, or to challenge Craig Whyte’s ownership of Rangers shares, then the costs will escalate even further.
At that rate, and I see no reason for the spending on lawyers, advocates and barristers to slow down, there will be a further £250,000 spent to the end of June.
As well as these cases, there is the potential SPL offset case, and the bills accruing in relation to the various SFA and ASPL disciplinary hearings and investigations.
Remember the Rangers Fighting Fund!
This has raised around £400,000 in the last five weeks since it was created. Can it continue to generate funds at the rate of £80,000 per week? Perhaps so.
Will that be of any use in June when full wages need to be paid, along with the rates bill mentioned above?
The Rangers fans who have supported the Fund deserve praise for doing so. However, standing the amount needed to run Rangers each month (£3.5 – £4 million) even these admirable efforts are just a drop in the ocean.
So Will Rangers (In Administration) Run out of Money, and When?
Yes. From all the calculations above (which I accept may well be wrong, but they are based on the best data available) I see it as being very hard for Duff & Phelps to make it past the end of June.
In addition of course, none of the above includes a penny paid to the Big Tax Case, the Medium Tax Case or the Wee Tax Case.
For Rangers to survive, Duff & Phelps need to sell the company to a bidder who will (a) pay off Craig Whyte for his interest and (b) put enough in the pot for a CVA to be acceptable to the taxman and other creditors. In addition, they need to complete the sale by the end of June. As that process would involve an investment over £100 million, without a penny going on players or staff, I think we can agree that that is not happening, and even if it was remotely possible, it is not happening within the next ten weeks!
For there to be an attempt for a “Rangers” to survive, Duff & Phelps would need to sell off the assets of Rangers Football Club PLC to a buyer in sufficient time for that purchaser to organise a license to play in the SFL/SPL, and for all arrangements to be put in place for a team to start next season.
The longer Duff & Phelps succeed in keeping the doors open, the less chance there is for a new owner of a “Rangers” to get everything in order in time for preparation of fixture lists for next season, for example.
I am coming to the view that there is almost certainly not going to be a Rangers, nor indeed a “Rangers” playing in Scottish football next season (apart from the team from Berwick of course).
The best, and possibly now only way to get over the hurdles of time and potential legal challenge to any sale as mentioned above, would be for a person or consortium looking to save “Rangers” to buy an existing club, and rebrand it, moving it, ideally, but subject to agreeing rent with the owner, to Ibrox.
It appeared that Rangers may have tried this with St Mirren and there are rumours that Cowdenbeath could be ripe for takeover. We will need to wait and see.
Posted by Paul McConville