Subsidiary Accounts Reveal Financial Outlay

The filing of a football club’s subsidiary accounts isn’t usually a notable or even remotely interesting event even for financial nerds like myself. In Rangers’ case ‘The Rangers Football Club Ltd’ is the main trading vehicle of the club and thus makes up the majority of the group accounts which are published online and presented at the Annual General Meeting.

The timing difference however between the group accounts being presented and the subsidiary financials being signed off and submitted meant some extra little nuggets of information were disclosed when they were made available on Companies House earlier this week.

NEW EDMISTON HOUSE (NEH)

The cost and timeframe for the construction of New Edmiston House has been something that has been debated by fans on social media since its inception. Originally rumoured to cost around £5-6m and with £2-3m or so part-funding coming from the sale of a section of the Albion Car Park it was to be a savvy investment in an asset that would generate revenue, provide profit and improve the matchday experience as well as play host to an overdue and very welcome club museum.

Global factors and rising inflationary costs however put a rather large and costly spanner in the works.  Promised as the flagship of the club’s 150^th celebrations and with work already having started the board were left between a rock and a hard place. Had they abandoned the project they would have been ridiculed and mocked. But having ploughed on the cost of that decision is now being laid bare in the financial accounts for all to see.

The group accounts to 30 June 2022 disclosed that £4m had already been spent on ‘Assets Under Construction’. The ‘Capital Commitments’ note further revealed that the club had contracted for a further £9.63m of capital expenditure at that point in time.

TRFC Ltd’s accounts note that £1.52m of that commitment lies within itself and thus the remaining £8m can only logically lie with New Edmiston House Ltd, the vehicle set up for the construction and operation of the now-constructed asset.

The overall cost therefore appears to be north of an eye-watering £12,000,000 and while Rangers have increased revenue and had record player sales we are not by any stretch of the imagination a cash-rich club. Fresh share issues totaling £3m and the £12m in interest-bearing director loans are testament to that.

Those loans are for all intents and purposes at least part of the funding method for the construction of Edmiston House. On the plus side this is internal funding from board members provided at lower-than-market rates of 6% and are repayable over six years to 31 July 2028. It’s important to acknowledge that.

On the flip side this means we will be repaying over £2m per year on those loans but with the venue only forecast, perhaps ambitiously, to provide a net profit of half of that at £1m according to John Bennett.

To offset that there has been the long-term commercial agreement entered into with Park’s Motor Group where commercial income was paid in advance to the club perhaps with a view to offsetting the negative cash impact of the above and assisting with the construction and, unlike loans, this is not money that has to be repaid so again this is a positive. The club also sold supporter packages to raise funds for the project.

Laying out the cost above isn’t intended as a cheap shot at the board or the executive team but rather just an objective look at the cost to the club. I think they were committed and had incurred costs for the project before external factors rocketed the costs. At that point they probably felt railroaded into continuing rather than sit with a hollow framework or waste piece of land for years to come.

At the end of it we have an asset that improves the footprint of the stadium, adds to the matchday experience for many, that hosts an improved club shop and eventually the eagerly anticipated club museum and which is now generating revenue through gigs and other bookings. While profit may only be £1m per year the additional revenue to get to that figure is an important factor for FFP under the new rules, enabling a higher spend on the first-team squad.

A comment on social media perhaps summed up the situation by saying there’s never really a ‘good time’ to invest in such an asset but certainly when you’re not winning titles it is an even harder sell.

NEH will bring many benefits as outlined above but it evidently comes at quite a significant cash cost to the club in the short-term.

BASSEY, ARIBO MONEY – GONE

Another important takeaway from TRFC Ltd’s accounts is the ‘movement in respect of player registrations and football management team’ under note 29 – Post Balance Sheet Events. This is where material information that occurs after 30 June is disclosed to shareholders via the financial statements.

This particular note details that – in the transfer windows of summer 2022 and January 2023 – the club purchased twelve players and sold or released seven. It also states that in November 2022 Giovanni van Bronckhorst and his backroom team were relieved of their duties.

Here is the key part: “the net amount payable of these movements, after adjustment for the notional effect on deferred payments, is £0.9m.”  So while there are accounting adjustments for the deferred payments / instalments the bottom line is we’ve essentially spent all the money.  This isn’t just the instalments received to date, it means that we have committed to spend the total money we have received and are due to receive, save for unknowns like sell-on fees etc.

The cost therefore of our summer signings (£15m), Raskin, Cantwell and the removal of the management team was £0.9m more, after accounting adjustments, than we received from the sales of Bassey, Aribo and Itten.

While this proves that funds have been reinvested in the team – excluding a rather hefty pay-off for van Bronckhorst – it also therefore reveals that we’ve had such little value for money for that spend given we are now facing the serious possibility of a trophyless campaign and with the manager stating that this squad needs a rebuild / revamp.

To be in the position of ripping things up after reaching a Europa League Final, the Champions League groups and having 3 major player sales in six months really is something which has not gone unnoticed by the fanbase.

Supporters hoping that we’d have excess cash from the Patterson and Bassey sales to spend in the summer can therefore think again. We’ve already committed to spend that money with very few hugely valuable assets remaining in the squad and that’s a concern.

The overview of the recruitment however is for another day and another article and Ross Wilson’s departure perhaps speaks for itself. I’ve tried to keep the above fairly factual and objective. Fans can make up their own mind on the money spent and whether we’ve received value for that outlay.

The accounts of The Rangers Football Club Ltd can be viewed here: THE RANGERS FOOTBALL CLUB LIMITED overview – Find and update company information – GOV.UK (company-information.service.gov.uk)