Rangers owners plan wage cap and season ticket hikes for share offer

Rangers' owners are planning to impose a strict wage cap and sharply increase season ticket prices as a key part of their share offering.

Documents seen by STV's Scotland Tonight programme show that the consortium behind Rangers wants to restrict wages to 33% of turnover, barely half the average ratio for SPL clubs.

The owners also plan to increase season ticket prices by 20% in 2014 followed by a further 15% hike the following year as the club is expected to climb up through the divisions.

Notes from broker Cenkos Securities, seen by STV ahead of the stock market flotation of The Rangers Football Club Ltd next month, reveal the season ticket prices would return to similar levels as last season, prior to the financial collapse of the oldco.

Cenkos’s projections state that although the company will run at a £3.5m operating loss in 2013, it could bring in an operating profit of £10.9m in 2015. Rangers chief executive Charles Green has endorsed the pre-initial public offering notes made by the brokers.

Mr Green told STV that he expected the club to be worth at least £60m in two years' time, which would represent a tenfold return on his original £5.5m investment in June this year.

"When you look at Rangers where it sits today, to have a valuation of around £30m, there's no reason why within a couple of years we haven't doubled that valuation at least," he said.

The severe constraints would put top European players beyond Rangers' reach, but the brokers believe that fiscal discipline will give the club a long-term advantage over "irrational competitors".

The projections by Cenkos claim that the value of shares in the newco club could “more than double in three years”, an assessment described as realistic by football finance expert Neil Patey.

Mr Patey, of Ernst & Young, said: "I think it's realistic to say Rangers could be a comparable value to Celtic in two or three years' time when they're back in the SPL."

According to Cenkos, Rangers directors are committed to a maximum ratio of players' wages to turnover of 33%, which is almost half of the 2010 Scottish Premier League average ratio of 61%, while English Premier League clubs sit at a current wage-to-turnover ratio average of 70%.

The notes state that in 2013 the first team payroll is to constitute 26% of all revenues with it currently sitting at around £7.5m, which will reduce to 18% of all revenues in the next two years as Cenkos predicts turnover to hit £46.5m by 2015.

Cenkos states that it “believe that this will be achievable with our growth revenue forecast and the current level of players wages being paid gives significant room for manoeuvre.”

The brokers also believe that the policy would be in line with UEFA’s financial fair play regulations, which stipulate that wage-to-turnover ratio should not be higher than 60%.

Cenkos states: “We suggest that investors should take comfort from UEFA’s reforms which are designed to end financial instability within football clubs.

"We believe the high level of player wage inflation and transfer fees driven by irrational competitors will be significantly reduced and, as one of the 20 best supported teams in Europe, the requirement for clubs to live within their means should work towards Rangers’ competitive advantage.”

Comparisons in the document are made to Celtic and Manchester United’s share market flotations as successes, with the brokers stating: “In our view the old notion that revenues from television are the only driver of value for football clubs has proven to be incorrect and it is the potential for selling branded product on a global, multi-channel, basis that has resulted in the value of the leading football clubs appreciating significantly in the past decade.”

The forecast is based on several assumptions set out in the document, including the season ticket price increase, as well as a £1.5m reduction in unspecified overheads.

According to Cenkos, non-matchday cash, including the £3m-a-year retail deal with Sports Direct, will bring in £17.5m in 2012-13 financial year, out-weighing matchday revenue of £13.5m. For the 2012/13 Third Division season, Rangers raised £8m through selling 36,000 Ibrox season tickets this year and £1m from corporate hospitality sales, according to the document.

The consortium led by Mr Green purchased the club’s assets from oldco Rangers, now RFC 2012 Ltd, in a £5.5m deal in June after administrators Duff and Phelps failed to maintain it as a going concern.

Mr Green and his group are aiming to raise around £20m through the initial public offering, with payments scheduled to be processed on the scheme by December 17.

Directors of the club are currently involved in road shows pitching the flotation to fans groups and possible investors across the UK.

In 2000, under Sir David Murray, oldco Rangers, now RFC 2012 plc, was floated on the stock market with the aim of raising £53.1m to pay off some of their debts. This resulted in £38m of investment, £32.3m of which was from Sir David's Murray Sports Ltd and the remaining £6m from around 3500 small shareholders.

Four years later Sir David oversaw another share issue which aimed to raised £57m for Rangers. It brought in £51m, only £1m of which was from the fans - the rest being underwritten by the Murray MHL Limited, one of the owner's companies.

This came after the Rangers Bond scheme in 1991, which saw 6700 fans raise £8.5m through buying debentures to construct the Club Deck at Ibrox Stadium. When Rangers went into administration, those who bought into the scheme became creditors.

More About Focus on Rangers

Related articles

People who read this story also read