"Let the others come after us. We welcome the chase. It is healthy for us.
We will never hide from it. Never fear."
- William Struth

A Financial Experts Opinion Of Rangers' Future

Written by: U_L
Wednesday, 18th February 2015

The problem I have is that it's near impossible to analyse a business plan that either doesn't exist or, at the very least, hasn't been made available for scrutiny.

The presentation given by King and Murray focused on vague statements with no numbers to back up any of their ideas, ambitions or claims. On that basis, and looking back on their prior records of personal investment levels (or lack thereof) and corporate governance, I'm left with no option but to oppose their involvement at our club.

When you leave a void of uncertainty, you have to expect that people will look at your prior record and discount any incompetence, as well as present and future unknowns, as diversifiable risk (in other words, risk that is avoidable).

Now why is that relevant? Nearly every business requires some sort of credit to operate so it's important to view the riskiness of Rangers through the lens of potential lenders. This is not just banks but also small companies that provide services and then invoice the club for the sums owed. They are a form of creditor as well. When you borrow money you are bringing forward future cash flow to pay for present needs/wants. If we have some level of certainty over what those cash flows will be, we can determine their net present value (for example, the net present value of a £2,200 wage in a simple market with a 10% lending rate would be £2,000 - the max one could borrow and pay back in full, including interest, with the future cash flow of £2,200) and calculate how much one can borrow against future earnings. Lenders will apply a severe discount or simply deny you point blank if you cannot give them an adequate business plan and assurances about the certainty of future revenues.

Put simply, I find it increasingly likely that suppliers and lenders will deem us too risky to do business with and that will hurt our club going forward. King and Murray have done absolutely nothing to alleviate any of the uncertainty that concerns me about their so far non-existent or non-available business plan. Yes, Rangers is about football but if you can't inspire enough confidence in companies to supply you with basic things like a player's kit, catering and credit/debit facilities for season book sales then you are in serious trouble.

Furthermore, the ongoing uncertainty and lack of a business plan will do nothing to attract sponsors and commercial partners. How can they calculate the worth of any deal to their brand if there is no certainty over the competitive or financial future of Rangers? If you can't quantify these things, one of two things happen. Either a severe discount is applied to any deal, thus depriving Rangers of revenue from potential sponsorships/commercial partnerships, or the deal never happens. Why does this happen? Because the companies we may strike a deal with will deem the uncertainty as diversifiable risk and simply move on in most cases. Either way, whether it's a bad deal or a non-deal, it doesn't help or maximise the strength of the Rangers brand.

The King and Murray presentation was one of the most unprofessional and pathetic I have ever seen. I genuinely fear for us going forward if they end up with boardroom control.

Their apparent lack of personal funds to invest into the business of Rangers (and not just in shares to get a board seat) is also of great concern. It becomes even more of an issue when Rangers has negative cash flow from ongoing operations and no clear plan, or even desire (see comments about running at a loss for x number of years after gaining control), to rectify an issue of massive importance to our long-term sustainability.

Loans are a temporary solution to a long-term cash flow problem. In the context of negative and declining cash flow, you will eventually run out of options because fulfilment of future loan repayments further dents cash flow and limits future borrowing power if it is not offset with growth in the ongoing operations of the company. Again, we've had no specific costings associated with a growth plan, no clarity on the rate of re-investment of any potential company earnings (nor a rate of investment from any potential external source) and no way of analysing what kind of return any expenditure may generate. We've simply been offered no figures that we can look at or derive any conclusion from.

I wish I could give you hard, supporting mathematical evidence to either oppose or support the involvement of King/Murray but, unfortunately, they haven't given me any numbers to work with or scrutinise. Therefore, I have no option but to interpret that uncertainty as diversifiable risk (avoided by their non-election to the board).

Now, is Mike Ashley any better? Not in terms of providing greater clarity over a proposed business plan. That much is certain. Again, I have to discount that as risk. When I make that comment, I'm talking about risk to the viability of the business and to the future success of Rangers so it's not just limited to markets, end of year financial results and share prices. This affects us as supporters in terms of the success we may enjoy and the type of football we witness on the park. The risk on the business side is very much intertwined with the football.

Having said that, Mike Ashley providing loan facilities of up to £10 million is actual hard evidence that he isn't prepared to see us go into administration at this stage. Whether or not that changes, or what might act as a catalyst for such a change of heart, is also unknown and must therefore be discounted as future risk.

The other slightly comforting fact in favour of Ashley is his personal wealth of many billions. However, once again, it is mere speculation alone for anyone to claim that he will spend any more of his fortune on us and whether or not that will come from debt or equity. Consequently, that also needs to be discounted as risk because it is yet ANOTHER layer of uncertainty!

Sadly, my answer is rather inconclusive but that is because we can only make assumptions about things we know and the present protagonists involved in the power struggle for our club give little information that can be used to alleviate any of the known uncertainties. As such, we can draw few conclusions due to the lack of data that would allow us to do otherwise. Quite simply, we have almost nothing that we can analyse and are left with a near impossible decision at the upcoming EGM. It's a choice between multiple uncertainties and that isn't a good position to be in, nor does it provide any comfort to us as concerned supporters.

I wish I had access to the information required to give you a more definitive answer. Unfortunately, I don't believe it's forthcoming.

If push came to shove, I'd give the slightest of preferences to Mike Ashley given his debt agreement and subsequent additional financial interest in the club (protection of that interest is incentive to ensure his investment is a success), as well as a greater capacity to invest larger sums of his own personal fortune in the club. However, there is no guarantee that will happen.


by D'Artagnan
by D'Artagnan


Recent Articles:

This site prevails due to the
sterling efforts of volunteers for no
financial gain
. If you wish, you
can donate to VB running costs
by clicking the button below

From The Archive: