Financial Disadvantage

In 2018 when Steven Gerrard walked into the Blue Room as Rangers manager for the first time he did so facing a Herculean task.  With the squad he inherited finishing third in the league behind Aberdeen and being knocked out of Europe by the fourth-best team in Luxembourg, the Liverpool legend was tasked with closing that gap and returning the club to the top of Scottish Football once again.

The gap though wasn’t just on the pitch. As the club rebuilt from the damage of too many years in the doldrums our revenue in 2017/18 totaled just £32.7m. Celtic’s for the same period stood at a staggering £101.6m, some 310% of our equivalent income. In fact their wage bill alone was nearly double our turnover for the entire club. It wasn’t so much a financial gap as a financial chasm.

European qualification under Gerrard helped narrow that gap with prize money and added gate receipts taking our turnover to £53.2m however with such a monetary disadvantage the rebuild was never going to be a one-season job. And so it proved.

The disparity wasn’t just seen in revenue either. While Rangers were front-loading investment largely funded by directors and shareholders to improve the squad, our city rivals were selling the likes of Dembele, Tierney and Frimpong for sums we could only dream of receiving at that point in time.

On the pitch though the gap closed and in one summer window where we strengthened and they regressed under a poor manager, we finally overtook them and did so in style. Each year our turnover and wage bill had increased and we had now put ourselves into a position of strength in terms of our squad and sellable assets and given ourselves a chance to qualify for the Champions League for the first time in too long.

The Champions League as we know never happened however financially it was replaced by that tremendous Europa League run that took us all the way to Seville. Stewart Robertson bragged and boasted about the income flowing into the club coffers as a result and within a six-month period we would add to that with two club record player sales in the form of Nathan Patterson and Calvin Bassey. Of more income we could not have dreamed in such a short period of time and yet as I write this we all know where we sit as a club at present.

In that Europa League final season only the different accounting recognition of retail revenue stopped our revenue eclipsing Celtic’s. Our retail income is received as profit meanwhile theirs is recognised as gross revenue with expenses being deducted thereafter. The revenues therefore stood at £86.8m vs their £88.2m and the financial chasm that existed in 2018 had become a mere crack. But that crack has expanded yet again as football success was quickly reversed back to the relative norm of the last decade.

Celtic published an ‘Announcement’ of their Financial Results for the year to 30 June 2023, the period effectively covering last season. And they are an astonishing set of number I regret to add:

• Revenue of £119.9m
• Profit before tax of £40.7m
• Gain on player sales of £14.4m (this included Jota)
• Net cash of £72.3m

The expanded details have not yet been revealed in the form of the full Annual Report which is circulated to shareholders and made available on their website however the headline numbers alone are sufficient to set alarm bells ringing.

Our comparative figures are also not available as they are traditionally published later in the calendar year ahead of our AGM so unfortunately I am unable to do an in-depth, in-year analysis however what is obvious is that in terms of turnover, profit and cash we will be lagging quite significantly behind on all fronts. And that’s a worry as we again attempt to close the gap on the field.

I don’t want to focus on Celtic too much and turn this article into a glorified wank-fest over their numbers. Instead it’s important to look at matters from a Rangers perspective and consider how we’ve gotten to where we are and how we overcome yet another financial disadvantage that in truth shouldn’t have been allowed to come back into existence quite so quickly or easily.

Our turnover for 2022/23 may reach circa £85-90m if we assume Champions League income replaced the Europa League windfall from the previous year and with commercial revenues continuing to rise under James Bisgrove. We should also factor in the disparity in retail revenue recognition which inflates their revenue figures or suppresses ours.

In truth one of the successes of the current board / regime has been in bringing money into the club. Often this is at the expense of supporters be it via MyGers or £60-per-game Champions League packages but if we step back and look at the income I don’t think we can have too many complaints in terms of the general trajectory over the last half-decade. The commercial increase has certainly been a welcome and necessary improvement.

Spending that money though is a different story. While Celtic have had non-recurring income from Postecoglou’s departure and business insurance from the pandemic, we conversely have had one-off costs such as the construction of New Edmiston House and the £8.25m settlement with Mike Ashley’s Sports Direct.

As mentioned above player trading has been the so-called final pillar of our model as a club and despite the sales of Patterson, Bassey & Aribo it has been where we have fallen behind again since we won the league title. Selling is only one side of that particular coin. The other side is the successful reinvestment of those funds and understandably this has been the focus of much criticism from the support in recent years.

Last summer we spent the majority of our £15m spend on Ridvan Yilmaz, Rabbi Matondo and Ben Davies. This summer a similar sum (gross, not net) was spent on Lammers, Dessers and Danilo. In terms of value for money last summer was utterly horrific and we need big improvements if the same isn’t to be said again for the current campaign.

Recruitment is key not just for what it brings on the pitch but also what sits on the balance sheet. If players are doing well they increase in value and you sell them and reinvest. It’s the model we aspire to and the one Celtic have implemented for years. But what assets do we currently have? We scraped together some funds in the summer with the majority coming from Glen Kamara, another player who wasn’t contributing. But who is left?

There will be value in Raskin in my opinion. Yilmaz we may be fortunate to get money back on based largely on age and what he did at his previous club. Dessers at his age won’t make us a profit and nor I imagine will Sam Lammers based on what we’ve seen so far. Danilo was already a big outlay at £5-6m and so he’ll need to do well to provide a big uplift on that but there will be value there if not profit perhaps.

And the whole thing becomes cyclical. If you don’t spend your limited budget well then you have fewer assets to sell going forward. Fewer assets means less money for future budgets and less money means you need to spend it much better than the team you’re competing against. It’s not easy and we find ourselves at least 2 summers into this downward spiral. And it’s reflected on the park if we’re being honest.

While Celtic’s revenue is clearly important as it allows a larger wage budget and such likes the real difference is in the buying and selling of players. Celtic’s transfer spend hasn’t traditionally come from a huge operating surplus, it comes from funds received for players they have sold. And that’s where we must improve.

Their sales allowed big outlays on Carter-Vickers and Jota for example with the latter being sold for big money. Meanwhile we’ve had to try and be shrewd with our additions with some free transfers and expiring contract signings needing to bring excellent value. And the money we have spent we haven’t spent well. It’s not sustainable if we want to challenge regularly nevermind actually win the majority of league titles over any given period.

The Champions League has been a huge advantage for them as their latest financials show. It will be larger this season with the complete share being allocated to them in our absence. Last season Celtic’s UEFA coefficient income was £9.1m against our £2.3m. They also received marginally more tv money. That’s a huge inbuilt advantage based on our respective 10-year records in Europe and sadly we just need to wait for that to normalise and fill in the gaps that exist in our record. Or we win the league and deny them automatic access to such riches. But it’s chicken and egg: how do you win the league with an inferior budget?

Post-55 was our chance. If we win that league there’s a good chance Celtic don’t qualify for the Champions League and the financial pendulum would have swung in the opposite direction. But we blew it and the consequences are being laid out in front of us.

If I may finish with a depressing recap. Financially, when our results are published, we’ll have a lower turnover, a lower profit and less cash in the bank. On the pitch we’ll likely be sitting behind them barring some sort of collapse. And we’ll therefore have less money available to rectify that in January or next summer.

How do we fix it? Either the board must cough up enormous sums of money yet again or they must find a way to spend the club’s money much better. That means recruitment. We’ve handed control over to a manager this summer but that’s not a long-term plan. We need a director of football in my humble opinion and a scouting system that yields better results than recent years.

There has been a lot of focus on Michael Beale recently and scrutiny is certainly merited but until we fix the underlying issues at the club then whoever is in the dugout is entering the ring with one arm tied behind their back.

Bennett and Bisgrove represent a change in the boardroom. They must quickly show that their plan will deliver change on the pitch.

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