How much will it cost to fund The Rangers FC through season 2012-2013, subject of course to obtaining a membership by tonight.
Some of the income and costs are per game and some are per annum. I have tried to extrapolate to a full year. The Duff and Phelps figures cover a period of approximately 20 weeks, split between playing season and close season. This period runs from 14th February to 29th June (from St Valentine’s Day to the Feast of Saints Peter and Paul).
I will be delighted if anyone wants to correct my sums. I have also rounded figures for ease of arithmetic. All figures therefore are approximate.
What Will The Rangers FC Spend in a Year in SFL3?
Wages and Salaries
When I looked at the initial Duff and Phelps report regarding wages, and this covered the period from 14th February to 30th March, I wrote the following regarding 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.”
Lots of players have left Ibrox, but still many remain. In addition, there are a couple of hundred non-playing employees. Taking a broad-brush approach, would it be fair to suggest the wage bill, as a result of high earners leaving, might not have reduced as far as it did during the Duff and Phelps negotiated pay cuts, but let’s say to £100k per week.
Messrs Alexander, Broadfoot, Wallace and McCulloch, on the playing side, along with Mr McCoist and his back room staff, would make up most of that figure, and I may in fact be underestimating the costs. However, I will go with that, giving us salaries of £5,200k per annum.
Pensions are also included with a sum of £108k for the period. On the same slashed budget above, I have taken this as being £150k for the full season.
On a wage run of £100k per week, the PAYE and NIC figure would amount roughly to £40k on top, giving an annual sum of £2,008k. During the spell covered by D+P’s figures, wages and salaries were paid totalling £2,799k. PAYE and NIC totalled £1,752k.
This has already been addressed in principle by mick in his series of Piegate posts.
The accounts show payments out of £991k for catering and food and beverages. Bearing in mind that the income from these was £389k that does seem remarkable.
Did D&P pay out £141k for food for each of the seven matches at Ibrox during their tenure? How much does a pie cost wholesale?
Looking at sensible figures, let’s say that in SFL3 they spend £50k on food per game. That is an annual figure of £900k.
Direct Match Day Costs – Home and Away
For the six home SPL games, this totalled £103k, giving an average of £17k per game. Over an 18 game season this comes to £306k.
For the six away SPL games, this totalled £55k, giving an average of £9k per game. Over an 18 game season this comes to £162k.
Payments For Away Tickets
I have left out of account the sums paid to teams for away tickets, as I have accounted for this in the income section below.
Security and Policing
Security and Policing costs are shown as £515k for the period. I have taken this as £89k per home game, leading to a season bill of £1,602k.
These are stated at £221k. Pro rata for the year this comes to £575k.
Lease And Hire Purchase Charges
These are stated at £343k and over a year would be £892k.
These are stated at £256k. Pro rata for the year this comes to £665k.
These are stated at £111k. Pro rata for the year this comes to £289k.
Player Agent Fees – this will depend on who Rangers can sell, so would be factored into income from that source.
Legal Costs – the sum in the Duff + Phelps report for this came to just under £25k. This related to the legal costs chargeable by D+P to Rangers, and therefore excluded the figure of well over £1 million accrued so far as costs in the administrators’ case against Collyer Bristow. Bearing in mind the possibility of lengthy legal battles regarding players, disciplinary matters etc, I have estimated a “low ball” sum of £200k for a season to cover all legal advice and actions.
SFA Fines – Rangers FC still has to pay the £160k fine for bringing the game into disrepute and will have to pay Mr Whyte’s fines too if he fails to pay. As a compromise I have put this in at £250k. Of course, there could still be other fines to be levied.
Programme Costs – £19k for 6 games = £57k for season.
Audio-Visual Costs – £59k for 12 games = £177k for season.
Media Costs – £54k for 12 games = £162k for season.
Medical Costs – £9k for 20 weeks = £23k for season.
Football In the Community costs – £44k for 20 weeks = £ 114k for season.
Sub Contractors’ Costs – £24k over 20 weeks = £62k per season.
Staff Expenses – £34k over 20 weeks = £88k per season.
Player Accommodation – £53k for 6 games = £159k for season.
Other Employee Costs – £32k per 20 weeks = £73k per season.
Merchant Services – £23k per 20 weeks = £60k per season.
Cash Collection Costs – £3k per 20 weeks = £7k per season.
Stationery and Postage – £32k per 20 weeks = £73k per season.
Petty Cash – £8k per 20 weeks = £21k per season.
Waste Disposal – £51k for 20 weeks = £153k for season.
Estimated Annual Costs
Wages and Salaries £5,200k
Direct Match Day Costs – Home £306k
Direct Match Day Costs – Away £162k
Security and Policing £1,602k
Facility Costs £575k
Lease And Hire Purchase Charges £892k
Software Licences £289k
Legal Costs £200k
Programme Costs £57k
Audio-Visual Costs £177k
Media Costs £162k
Medical Costs £23k
Football In the Community costs £114k
Sub Contractors’ Costs £62k
Staff Expenses £88k
Player Accommodation £159k
Other Employee Costs £73k
Merchant Services £60k
Cash Collection Costs £7k
Stationery and Postage £73k
Petty Cash £21k
Waste Disposal £153k
SFA Fines £250k
TOTAL £13.428 million
I have not included VAT in my sums on the basis that the figures produced will be ex VAT, I assume.
What About Rates and Insurances?
No rates were paid by the administrators in the period referred to. This might be because the club pays in two instalments per year, in December and June, or because the administrators are entitled to treat it as an expense of the administration, to be aid at the end. In any event, Sevco Scotland Ltd will have rates to pay
Rangers’ rateable value for Ibrox Stadium is £1,916,000. Interestingly, Glasgow City Council still lists the proprietor as “Rangers Football Club Ltd”. There is no such company in existence.
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. There is a supplement of £0.08 for properties with Rateable Values over £35,000. I will ignore the additional rates supplement for retail premises selling alcohol and tobacco. I suspect these are both sold at Ibrox, but I will leave it out of account just now.
Therefore, subject to reliefs, the annual rates bill for Rangers = (£0.45 + £0.08) x (£1,916,000 + £598,500) = £1,332,685.
As far as insurances are concerned, I will assume that they are included in the various categories of facility costs, staff expenses etc.
Total Running Costs of The Rangers Football Club
Adding the rates bill to the total above gives a final estimated figure of £14.761 million.
Bearing in mind that the running costs under Sir David Murray and Craig Whyte were between £3.5 million and £4 million per month, a reduction in costs to around £1.2 million per month would be a remarkable effort, although made easier by the massive proportion of a football club’s costs which is in the form of wages.
Looking at an 18 home game SFL season, what crowds and sales are likely to be generated, and more importantly, what income needs to be generated?
This will be negligible by comparison with SPL income, so I will disregard it for these purposes.
The D+P report showed sponsorship income of £773k for the period. I will estimate £1,000k for the coming season.
This is a “wild card” so I will come back to it below.
The additional trading income of programme sales, hospitality and food and beverage sales in the figures is applicable to the seven home games played. They total £729,000. This works out at £104,000 per home match. It is likely that that income would not be replicated in an SFL3 season. Rather therefore than that amount, let’s reduce it to £60k per match. Over 18 games that amounts to £1,080k.
Stadium tours generated £23k. Over a year that comes to £60k.
Finally there are “other sales” totalling £394k. This comes to £1,024k annually. That would take a hit too, I am sure. Applying a similar reduction as above takes us down to roughly £600k.
Prize Money Nominal
Player Sales Wild Card
Programmes, Hospitality and Food £1,080k
Stadium Tours £60k
Other Sales £600k
Where Does This Leave Sevco Scotland Ltd?
The total Estimated Income excluding ticket sales and player sales comes to £2,740k.
Therefore, to break even, on a receipts and payments basis, requires additional income of £12,021,000.
Or to put it another way, £1 million per month for twelve months, with a spell of around 2 ½ months when no football is played.
This can come from ticket sales, player sales, proceeds of Cup matches and further investment.
On the other hand, the investors want a return, and the outgoings figures do not include nay dividend or return to them. In addition there is nothing included regarding capital expenditure, such as the much touted remedial work required at Ibrox in connection with stripping of asbestos, for example.
This method normally gives football teams most of their cash, allowing them to use it up as the season progresses. The Ibrox season ticket has been announced starting at a price of £258. Can Mr Green sell 25,000 at that price? For our purposes we need to take the net cost, before VAT is added.
A £258 ticket = £215 plus VAT.
To fund the full shortfall (and I know this is the cheapest season ticket) would require £12,021,000 / £215 = 55,911 season tickets at that price.
Rangers, I confidently predict, will not sell in excess of 50,000 season tickets for this season.
During the period D+P have accounted for Rangers had six home SPL matches together with the Rangers v Milan “charity” match. They also played six away games in the SPL.
Ticket sales are stated to be £2,014k. 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 £508k.
Therefore the net income from sales of tickets is £1,506k. This includes the sum representing Rangers admin fee for selling away tickets. Therefore the net ticket sales for the seven home games are about £1,480k. If the average cost of a ticket for Ibrox was around £20 or so, then this represents approximately 75,000 tickets over the seven games, including away fans. Of the six SPL matches, the attendance was made up of season ticket holders, and for the charity match, each customer was a “pay at the gate” at a net charge, I recall, of £10. That suggests therefore that, over and above the season tickets, Rangers sold around 7-8,000 tickets for each home SPL game.
Away teams, and in particular Celtic, brought lots of fans making up those numbers. SFL3 teams will not bring thousands of fans. Will Rangers be able to make up the shortfall?
If we take it no season tickets are sold, but Rangers fans will pay £20 per head at the gate to see SFL3 games, how many fans will they need at each match?
£12,021,000 / £20 = 601,050 tickets at that price. Divided by 18 matches, that gives us 33,391 per game.
If season tickets are sold, as they are at a cheaper per game rate, then more tickets need to be sold on the gate.
Remember the Rangers Fighting Fund!
This had a balance of £524,000 or so at the start of July. You can see the details here. rangers fighting fund 4-7-12 – Sheet1£630,000 has been paid in to the Fund since it started.
The Rangers fans who have supported the Fund deserve praise for doing so. However, standing the amount needed to run Rangers each month (£1.2 million on the above figures) even these admirable efforts are just a drop in the ocean. The full sum donated since February would cover two weeks’ expenses only.
If it was all handed over to Rangers FC, it would help, but not hugely.
Can Sevco Scotland Ltd fund Its Team for the Next Season?
The figures above are very rough estimates, although based on valid source material.
I think that my cost figures might be under-estimated. For any business to reduce its monthly costs overnight from £3.5 – £4 million to £1.2 million would not be easy.
I have not factored in the costs of redundancy payments which in some cases might well be substantial, and necessary to reduce the wage bill as foreseen by me.
Even on the optimistic basis I have mentioned, it looks as if Rangers would need in excess of 33,000 fans paying to see each and every home game to keep their head above water. I suspect (a) that that number is actually too low and (b) it would not be achievable anyway.
In addition, talk of signing new players on £7,000 per week wages suggests that the wage bill, whilst down, will fall nowhere near as much as it needs to.
Posted by Paul McConville