Just been sent this by a work Colleague

[theboyharley 5]

I know we've had a few debates about finances recently but im hoping this grim picture painted by one of them is more in hope than in fact.

 

While income and expenditure both turned slightly against Celtic last season, it was bonanza time at Ibrox where Rangers published record turnover as a result of the double bounty; Champions League group stage income followed by a run to the Uefa Cup final in Manchester.

 

 

 

Celtic turnover (t/o) was �£75.237m compared to Rangers �£64.452m, but Rangers outsource their merchandising operation, including only a licence payment from JJB Sports in the figures, whereas the Celtic figure includes total income from merchandising sales.

 

 

 

Celtic earned �£16.092m from merchandising sales, contributing a margin of �£4.8m in a financial year without the release of a new home shirt. When Rangers signed the JJB deal in 2006 they revealed they would earn �£3m each year, plus �£1.45m amortised in the Profit and Loss account (P&L) but paid at the start of the contract in 2006, criteria was in place to provide for bonus payments should unspecified targets be achieved.

 

 

 

It was, therefore, with some astonishment that no bonus payments were earned, despite the unprecedented proliferation of Rangers merchandise walking the streets ahead of the Manchester riot.

 

 

 

I understand that the bonus is dependent on progress to the latter stages of the Champions League, which ironically would have sold a lot less kit for JJB; it appears Rangers had overlooked a clause for Uefa Cup progress.

 

 

 

The big area of interest from a financial statement is the indication of where a company is heading next. Celtic will earn at least �£70m this season but if they finish higher than bottom place in the Champions League group stage they should reach �£75m.

 

 

 

By contrast, Rangers are looking at financial Armageddon. In 2004-05 they earned �£34.48m (from continuing operations), a whopping �£30m less than last season, but 2004-05 included four home European games, each with TV rights, compared to only one this season.

 

 

 

�£34m will be the upper limit of their income potential this season; it will be less still, unless a good run in the domestic cups includes high-earning home games, a whole �£40m less than what I expect from Celtic and still �£28m less than the Celtic figure adjusted for comparable merchandise income.

 

 

 

Celtic salary costs were �£38.981m, a �£2.5m increase on the previous season, compared to �£34.339m at Rangers, up a massive �£10.1m on 2007. The latter figure will in part reflect incentive payments for European progress, although the clutch of new signings who arrived at the club in 2007 will make up the bulk of the increase.

 

 

 

In a masterstroke of business acumen, Rangers chief executive, Martin Bain, appears to have included the Uefa Cup in bonuses to be paid, but not on bonuses earned.

 

 

 

I was delighted to learn that Rangers pay more for the remarkably unpopular Bain (�£668k) than Celtic pay for 'Self Appointed Football-Integrity Judge and Jury' (W.Smith), Peter Lawwell (�£514k). Although perhaps Bain's remuneration also reflected Uefa Cup progress. You would think that with such big numbers flowing into his own bank account the whole 'What will be get if we do well in the Uefa Cup?' question would be at the front of his mind when he negotiated with JJB.

 

 

 

Football club's P&L income figures do not include player sales, with are recorded on the balance sheet, so Rangers sale of Cuellar will bring in �£7.8m more than the income figure, which itself will be offset in cash terms by the �£1.45m banked back in 2006 from JJB.

 

 

 

Before they start to spend on extravagances like footballers, clubs have considerable costs to pay. Rates, electricity, property maintenance, policing, to name only a few, cost Celtic �£15.395m. Rangers figure was higher than this, perhaps as a result of exceptional items resulting from the run to the Uefa Cup final, so the previous year's cost of �£16.262m will be a better indicator of costs this year, which is just �£18m less than their anticipated income available for football and other operations.

 

 

 

By comparison, Celtic will have in the region of �£45m available for football and other operations when adjusted for the merchandise sales difference.

 

 

 

Net bank debt at Celtic was �£3.52m compared to Rangers' �£21.559m but while Celtic are set to come out of debt in May (barring an exceptional expense in January), Rangers net year-end debt is likely to rise beyond �£30m unless significant steps are taken to sell players in January.

 

 

 

Celtic are in an exceptionally strong financial position. They can survive the vagaries of football fortune, or economic downturn, without the threat of cutback should income dip.

 

 

 

Conversely, Rangers are in dire trouble. This year will not be financially the worst Sir David Murray has bestowed on his club, but it will make for horrendous reading to any prospective buyer of the club and provide further evidence that they are hopelessly adrift of financial security.

 

 

 

Winning the league this season and qualifying for next season's Champions League will not provide succour from their structural problems, it would only result in a temporary slowdown in decline.

 

 

 

Rangers debt has risen inextricably, and is set to continue to rise, at a time when bank facilities have become more difficult and expensive to acquire.

 

 

 

Should new HBOS owners, Lloyds TBS, take fright at the property-to-football conglomerate, Murray International Holdings, which includes Rangers, frankly, the consequences are so dramatic, I don't think we should discuss them, as I have trouble sleeping when I get too excited.

 

 

 

We live in a time when things which simply cannot happen, happen. When some of last year's most credit-worthy companies in the world have gone into receivership; when one of the centuries-old pillars of the Scottish business community crumbled in days.

 

 

 

No company dependent on a significant increase in its debt is safe.

 

 

 

Rangers Football Club, 1873 - 20??

[alexscottislegend 2,325]

Frightening. but what I don't understand is that if our our modest debt is so dangerous, then what about the likes of Chelsea with their �£45 million is it?

 

Also - Europe is vital to our success. Now the Scottish clubs' automatic champions League entry is at risk, thanks to those green and white mobsters failing to win away.

[craig 5,199]

Frightening. but what I don't understand is that if our our modest debt is so dangerous, then what about the likes of Chelsea with their �£45 million is it?

 

1. Chelsea's debt is much higher than that I believe. 2. They have an owner who can pump money into the club at will. If you look at the personal wealth of Abramovich vs Murray you will see why their debt isn't as much a concern 3. Chelsea play in a league which is saturated with money. 4. We need to worry about OUR debt - another club's debt is irrelevant to us, at least in the grand scheme of things.

 

Also - Europe is vital to our success. Now the Scottish clubs' automatic champions League entry is at risk, thanks to those green and white mobsters failing to win away.

 

Actually..... to be fair to the mhanky mob - OUR Euro performance this year has done as much to put the automatic entry at risk as their away record has.

[calscot 0]

I thought Chelsea's debt was something like 800M although most of it is in interest free loans from Abramovich. As long as he stays interested, they are fine.

[craig 5,199]

I thought Chelsea's debt was something like 800M although most of it is in interest free loans from Abramovich. As long as he stays interested, they are fine.

 

736 million as at end of June 2007. So your 800 could very well be right. And again you are right that they dont need to worry as long as he stays interested.

[alexscottislegend 2,325]

1. Chelsea's debt is much higher than that I believe. 2. They have an owner who can pump money into the club at will. If you look at the personal wealth of Abramovich vs Murray you will see why their debt isn't as much a concern 3. Chelsea play in a league which is saturated with money. 4. We need to worry about OUR debt - another club's debt is irrelevant to us, at least in the grand scheme of things.

 

 

 

Actually..... to be fair to the mhanky mob - OUR Euro performance this year has done as much to put the automatic entry at risk as their away record has.

Take your point Craig, but no one is immune from the credit crunch -even Abramovitch and I cannot believe that the whole pack of cards may not finally come timbling down.

[pete 2,499]

Rangers are ready to sell at least six players this January to lighten their wage bill.

 

The Daily Mail says a number of players are under threat with the absence of European football having cut demands on a squad who played a record 68 games last season.

 

Midfielder Brahim Hemdani is a top earner and a prime candidate to be heading for the exit door, with Jean- Claude Darcheville another who could prove surplus to requirements come the turn of the year.

 

Christian Dailly and Chris Burke are others who are out of contract in the summer, while there is an agreement in place with Blackpool that could make Alan Gow's departure permanent for a fee of around �£250,000.

 

Others such as Andy Webster and Steven Smith, who is still out injured, could find it difficult to retain a meaningful future.

 

David Weir is under contract until next summer, by which time he will be 39, and finding a long-term replacement for the Scotland veteran looks the only significant impending 'gap' in the squad.

 

Saving wages is important to Rangers given the �£12million hole in the budget following the Champions League exit to FBK Kaunas and there might even be a case for selling the likes of Andrius Velicka or Lee McCulloch.

 

Add McGregor to that lot as i am pretty sure that will now happen. i would hope for 5mill+

[Bluedell 5,627]

Celtic turnover (t/o) was �£75.237m compared to Rangers �£64.452m, but Rangers outsource their merchandising operation, including only a licence payment from JJB Sports in the figures, whereas the Celtic figure includes total income from merchandising sales.

Correct. The top line turnover figure is therefore largely irrelevant when comparing the two clubs.

 

 

Celtic earned �£16.092m from merchandising sales, contributing a margin of �£4.8m in a financial year without the release of a new home shirt. When Rangers signed the JJB deal in 2006 they revealed they would earn �£3m each year, plus �£1.45m amortised in the Profit and Loss account (P&L) but paid at the start of the contract in 2006, criteria was in place to provide for bonus payments should unspecified targets be achieved.

 

So on face value it appears that Celtic did better from Merchandising than Rangers but let�s look as little closer at the figures.

 

Rangers also benefit from interest savings of perhaps around �£700K due to the �£18m upfront payment received and that needs to be taken into account when comparing the two clubs.

 

Letâ��s look at Celtic now. The 2008 figures are quoted above and the 2007 comparatives show turnover of �£18.4m generating profit of �£6.6m. But hang on a minute. Letâ��s look back at their 2007 accounts. They show 2007 Merchandising turnover as �£13.4m, but donâ��t show any profit figures. They have taken �£5m out of Multimedia and Communications and put it into Merchandising.

 

If we look at their wording carefully they have added in that Merchandising includes income from ââ?¬Å?retail partnersââ?¬Â. I donââ?¬â?¢t know for sure what this means but appears that they have reallocated some income, perhaps sponsorship income into Merchandising to make it appear that they are earning more than Rangers.

 

It can only be presumed that Celtic made nothing like �£4.8m from Merchandising if looking at like for like comparison with Rangers.

 

Fairly pathetic that they felt the necessity to do that.

 

 

I understand that the bonus is dependent on progress to the latter stages of the Champions League, which ironically would have sold a lot less kit for JJB; it appears Rangers had overlooked a clause for Uefa Cup progress.

 

He�s alleging that our bonus from JJB is only dependent on sales if we do well in the Champions League? So apparently in his crazy world, we do well in the Champions League and sell nothing then we get a bonus, but do well in the UEFA Cup and sell loads we don�t.

 

 

The big area of interest from a financial statement is the indication of where a company is heading next. Celtic will earn at least �£70m this season but if they finish higher than bottom place in the Champions League group stage they should reach �£75m.

They had a turnover of �£73m last year and made a loss before the sale of players of �£1.3m. Hardly awe inspiring.

 

 

By contrast, Rangers are looking at financial Armageddon. In 2004-05 they earned �£34.48m (from continuing operations), a whopping �£30m less than last season, but 2004-05 included four home European games, each with TV rights, compared to only one this season.

 

�£34m will be the upper limit of their income potential this season; it will be less still, unless a good run in the domestic cups includes high-earning home games, a whole �£40m less than what I expect from Celtic and still �£28m less than the Celtic figure adjusted for comparable merchandise income.

I�m not sure what this obsession with turnover is about, but if you want a more reasoned review of what we and will not make this season then read my review of the Rangers accounts.

 

 

Celtic salary costs were �£38.981m, a �£2.5m increase on the previous season, compared to �£34.339m at Rangers, up a massive �£10.1m on 2007. The latter figure will in part reflect incentive payments for European progress, although the clutch of new signings who arrived at the club in 2007 will make up the bulk of the increase.

So despite the high level of bonuses paid, Rangers still had lower salary costs. Should this not be a concern to him? And yet again, he gets his facts wrong. The bulk of the increase was due to bonuses, and not the new signings.

 

In a masterstroke of business acumen, Rangers chief executive, Martin Bain, appears to have included the Uefa Cup in bonuses to be paid, but not on bonuses earned.

I have read this several times and still don�t know what he means. Not sure if he does either.

 

 

I was delighted to learn that Rangers pay more for the remarkably unpopular Bain (�£668k) than Celtic pay for 'Self Appointed Football-Integrity Judge and Jury' (W.Smith), Peter Lawwell (�£514k). Although perhaps Bain's remuneration also reflected Uefa Cup progress. You would think that with such big numbers flowing into his own bank account the whole 'What will be get if we do well in the Uefa Cup?' question would be at the front of his mind when he negotiated with JJB.

My views of Bainâ��s salary are well documented, but I note that Celtic have given Lawwell an additional �£114K on top of his normal bonus. Presumably this is to try and match Rangers overspending in this area? Fairly pathetic that they felt the necessity to do that.

 

 

Football club's P&L income figures do not include player sales, with are recorded on the balance sheet, so Rangers sale of Cuellar will bring in �£7.8m more than the income figure, which itself will be offset in cash terms by the �£1.45m banked back in 2006 from JJB.

 

Player sales ARE included in P&L income figures. The rest of this paragraph makes as much sense. I really have no idea what he is getting at. What has the sale of Cuellar, which will be in next year�s accounts got to do with 2006 JJB cash, and the fact that he has no idea how basic accounting works shows that this report should not be treated with too much seriousness.

 

 

Net bank debt at Celtic was �£3.52m compared to Rangers' �£21.559m but while Celtic are set to come out of debt in May (barring an exceptional expense in January), Rangers net year-end debt is likely to rise beyond �£30m unless significant steps are taken to sell players in January.

Celticâ��s net debt was actually �£6.71m, but letâ��s not get too hung up on accuracy.

 

 

Conversely, Rangers are in dire trouble. This year will not be financially the worst Sir David Murray has bestowed on his club, but it will make for horrendous reading to any prospective buyer of the club and provide further evidence that they are hopelessly adrift of financial security.

 

Winning the league this season and qualifying for next season's Champions League will not provide succour from their structural problems, it would only result in a temporary slowdown in decline.

 

Rangers debt has risen inextricably, and is set to continue to rise, at a time when bank facilities have become more difficult and expensive to acquire.

It�s definitely a concern, but he probably got this from reading my review of the Rangers accounts.

[Frankie 8,562]

Excellent riposte mate...

 

While we have every right to be worried about our accounts, subjective hyperbole should be challenged at every opportunity...

[Bluedell 5,627]

Sorry it's not been sooner. Have been unable to type properly for the last few days due to wee visit to the hospital. Typing even one line was a nightmare.

 

Edit - I don't mind when one of us slags us off financially, but not one of them.