This week Mr Green revealed that “Rangers” will make a loss this year. Sadly, from what I read, he did not indicate if this was “Rangers” the football club; Rangers Football Club Ltd (formerly Sevco Scotland Ltd); or Rangers International Football Club PLC.
However his comments, quoted on the official Rangers website, raised a couple of queries regarding (a) the correctness of the information given on the website and (b) the obligations of the Chief Executive of a quoted public limited company when telling people about potential profits and losses. I will address the second in a later post.
As extracts from the article state:-
CHARLES GREEN has detailed how he plans to turn Rangers from a loss-making company into a profitable one over the next year.
As per projections in the prospectus made available to potential investors late last year, the 2012/13 campaign is seeing money being lost by the Light Blues.
Green said: “The company is currently trading at a loss and the reason for that is our income is halved from coming out of the SPL and Europe and going into the Third Division.
“Typically, Rangers would be close to a £60million turnover per year and we’re down to below £30million now.
“It’s not an overnight thing. All of those things will take a year or two but the losses are a one-year thing and they won’t be here next year. We’ll grow and grow thereafter.”
Firstly the article does not specify who or what the “company” he is referring to actually is. However the reference to the prospectus might suggest he is speaking about the company which was the subject of the prospectus, namely Rangers International Football Club PLC.
Anyway, I thought I would have a look through the share prospectus to see what that actually had to say about profits and losses. After all, as the official Rangers website tells us, the projections were in the prospectus.
Page 7, which contains some of the summary, includes the line:-
there are no profit forecasts or estimates in this document.
Interesting. How, if there are no forecasts or estimates in the Prospectus, did it in fact “project” the losses?
On page 22 we find the following:-
Any forward-looking statement contained in this document based on past or current trends and/or activities of the Company should not be taken as a representation that such trends or activities will continue in the future. No statement in this document is intended to be a profit forecast or to imply that the earnings of the Company for the current year or future years will necessarily match or exceed the historical or published earnings of the Company.
On page 31:-
The Directors believe that the FFP (Financial Fair Play) will benefit the Company as the Company’s aim is to avoid significant losses and is expected to be run as a profitable and self-sustaining organisation, thereby differentiating itself from many of the leading clubs in Europe, which are heavily reliant on ownership funding their costs. These developments are likely, in the view of the Directors, to lead to further, possibly large scale, reorganisations of European football, which will focus ever increasingly on underlying club profitability.
Page 49 contains a financial statement for the three months from incorporation of Sevco Scotland Ltd to 31st August 2012. This shows the following:-
Profit from Operations £13,120,000
Profit from Ordinary Activities Before Taxation £12,947,000
Profit for the Period £13,884,000
(Of course that “profit” figure arises as a result of the addition of “negative goodwill” of £20,465,000 – Page 62)
So, unless I have missed it, there are no such “projections” within the Prospectus. There is nothing in the prospectus, as far as I can see, which states that a loss will be made this year.
The prospectus does not contain a projection of a turnover of £30 million.
I am sure therefore that there is simply some misunderstanding or “sub-editing error” on the part of the Rangers website. After all, it would certainly not be the case that Mr Green was attempting to put a spin on figures, and suggesting that, all along, investors had been made aware of what he was now saying.
It does seem odd that, despite him his company’s website saying that the projections were in the prospectus, they are nowhere to be found and indeed the prospectus specifically states that there are no projections.
Maybe, as well as signing James Traynor from the Daily Record, Rangers could have brought in a couple of good sub-editors who would have noticed the discrepancy.
After all, it cannot be good for an “official” website to make the boss look silly by attributing incorrect statements to him!
Posted by Paul McConville
*Please note that the prize for locating such a projection in the Prospectus is a feeling of satisfaction at having shown me up as a person who cannot read a simple 122 page financial document.