Last week, (7:30pm 4th July) when musing on cash flow problems and in solvency I said:
”… cash flow just melts away and you’re insolvent, bankrupt, gone – all in a few short weeks. The lesson is that even the slightest whiff of cash flow problems is enough to start the vicious circle. If you’ve never managed critical cash flow without a safety net – be warned. Suppliers beware.”
I’d like to clarify for Wanka – in the labelling game – I’m not Charles Green – but he does seem to be taking serious note of some alarming trends – and in the Scottish Sun on 5th July has just farted a big eggy whiff of cash problems. Just to recap:
Costs UP – Green pay off, Mather £280k, overlap period paying both – all unplanned
Revenue DOWN – 9000 fewer ST sales than last season – same drop as last year – minus 9000 x £250 = minus £2,250,000
Revenue DOWN – Tennents sponsorship deal replaced by Blackthorn sponsorship deal – £1.5m replaced by – well let’s say maybe £0.5 (details secret)
Costs UP – central defenders previously on loan paid off at €1m to be replaced by cost of two new signings – double paying
Revenue DOWN – Nike sponsorship deal replaced by Puma deal – £1.5m replaced by – well let’s say maybe £0.5m (details secret)
Costs UP – CPI inflation at 2.7% on all running expenses
Costs UP – a stitch in time saves nine – Ibrox maintenance deficit increases net cost of repairs
Costs UP – Legal contingencies – Sandaza, Craig Whyte’s Letter Before Action – lawyers at £500/hr for 200hr/y – so let’s call it £100,000– before consideration of settlements – which could be £0.5m for Sandaza and millions for the LBA
Revenue DUBIOUS – Buy a Blackthorn shirt – out of date by May – 1 year deal only – careful whose name you put on the back – fire sale coming.
Costs UP – seven figures for Huawei Wi-Fi router, Computer Weekly
What Mr Green probably also recognizes is that the IPO money is being spent on day to day expenses (players, perks, toilet rolls and tea bags) and not on re-structuring the business. The prospectus laid out the plan for the £20m – but which of these things is money being spent on – (clue – it’s the fourth one)
6. Use of proceeds and effects of the proceeds [of the IPO proceeds]
The Company plans to use the money raised from the Placing to improve the infrastructure of the Club.
In particular, the Directors have identified:
- upgrades to Ibrox Stadium (approximately £5.5 million);
- acquisition and development of land assets adjacent to the stadium (approximately £4.5 million);
- other identified projects which could result in additional revenue generating activities
(approximately £3.0 million); and
- general working capital purposes.
Investors locked in to their shares will be getting twitchy because the share price is in danger (54p per share and counting down) – any analyst can see the plan is not being followed, there are warning flags flapping, the IPO cash is evaporating and there appears to be inaction or ignorance in the board room.
Well said Mr Green!
Posted by mcfc