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Chairman's statement on accounts


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Highlights

 

* No longer reliant on bank funding

 

* Turnover at GBP57.2m for 2010/11 was an overall increase of GBP0.9m over the

previous year

 

* Gate receipts and hospitality sales increased overall by GBP1.3m to GBP27.1m

 

CHAIRMAN'S STATEMENT

 

When I became the majority shareholder and Chairman of this great football club

in May this year, the sense of honour and privilege I felt was overwhelming.

Those feelings are stronger than ever within me now.

 

First, I would like to address what matters most to every Rangers fan -

football. In recent years the performance of the players and the football

management team has been quite magnificent and I would suggest their

achievements rank among the Club's greatest.

 

Three successive League titles, three out of the last four Scottish League

Cups, plus two Scottish Cups and a UEFA Cup Final appearance is extraordinary

by any standard and set the seal on Walter Smith's outstanding second term as

Manager and a truly remarkable managerial career. Every Rangers supporter owes

him an enormous debt of gratitude.

 

Walter also left the Club in good hands and Ally McCoist, Kenny McDowall and

Ian Durrant are showing the same tremendous drive for success. All of us wish

them - and the players - continuing success this season.

 

In May, the Club entered a new era both on and off the pitch. Whilst this

Statement covers the 12-month period ending on 31 June 2011, it also affords us

the opportunity to look forward.

 

I am the first to recognise the contribution that my predecessor as majority

shareholder, Sir David Murray, made to Rangers over 20 years. With any change

in ownership, however, there will be a change in approach and I firmly believe

the changes I have implemented will be in the longer-term interest of the Club,

which must always come first.

 

We have a new Board. In addition, we have appointed a new Chief Operating

Officer to drive the business forward and take advantage of emerging

opportunities and a Director of Football, whose role is to help Rangers

maximise every opportunity to develop, attract and retain playing talent, as

well as ensure the Club engages productively with football authorities at

domestic and international level.

 

Perhaps the biggest change that has been effected since the takeover in May has

been the repayment of all bank borrowings. The Club is no longer reliant on

bank funding, nor does any bank control our operations on a daily basis.

 

I hope fans would share my view that, looking ahead, the Club should do

everything to live within its means and operate on a commercially viable basis.

I firmly believe that is the only sustainable, long-term strategy for Rangers.

 

Performance on the field has a direct bearing on the Club's business

performance. Participation in the UEFA Champions' League remains important

although increasingly difficult to achieve given the qualification process for

the SPL champions.

 

During 2010/2011 we qualified for the UEFA Champions' League and played in the

UEFA Europa League. Turnover at GBP57.2m for 2010/11 was an overall increase of GBP

0.9m over the previous year. Gate receipts and hospitality sales increased

overall by GBP1.3m to GBP27.1m, due to the extra European games games, although

there was an overall reduction in season ticket sales, hospitality sales and

sponsorship revenue.

 

Net operating expenses increased by GBP3.6m to GBP47.5m reflecting increased salary

levels, higher European fixture costs and operational cost increases across the

business.

 

The Club remains embroiled in historical tax issues with Her Majesty's Revenue

and Customs, primarily the tax tribunal on Employee Benefit Trusts. It has been

a dark cloud hanging over the Club for far too long and any resolution must

enable the Club to move forward.

 

Rangers has never been short of challenges in recent years and there is no

question there are many challenges ahead for both the Club and Scottish

football in general. However, I am certain that, as a Club, we can rise to

these challenges and deliver success both on and off the pitch. That is what

Rangers is all about.

 

I would like to take this opportunity to thank all supporters who have offered

me so much encouragement. Your support for the Club is inspirational and I can

only promise to ensure that the interests of Rangers and our fans will be at

the heart of everything I do as Chairman.

 

Craig Whyte, Chairman

 

Unaudited Consolidated Profit & Loss Account

 

for the year ended 30 June 2011

 

2011 2010

 

GBP'000 GBP'000

 

Turnover 57,183 56,287

 

Net operating expenses (47,525) (43,856)

 

Trading profit / (loss) 9,658 12,431

 

Amortisation of player registrations (8,412) (7,339)

 

Operating profit / (loss) 1,246 5,092

 

Exceptional items:

 

Gain on disposal of player registrations 4,202 512

 

Taxation of Discount Option Scheme (3,270) -

 

Profit / (loss) before interest and taxation 2,178 5,604

 

Interest payable (2,102) (1,395)

 

Profit / (loss) on ordinary activities before 76 4,209

taxation

 

Taxation - -

 

Profit for the year 76 4,209

 

Basic and diluted earnings per share 0.07p 3.87p

 

 

Basic earnings per share is calculated by dividing the earnings attributable to

ordinary shareholders by the weighted average number of ordinary shares

outstanding during the year.

 

For diluted earnings per share, the weighted average number of ordinary shares

in issue is adjusted to assume conversion of all dilutive potential ordinary

shares. The Group has 1,200,000 of potential dilutive ordinary shares at 30

June 2011. As the current share price is below the option price, the basic and

diluted earnings per share is the same.

 

The Directors do not recommend the payment of a dividend (2010: nil).

 

Unaudited Consolidated Balance Sheet

 

as at 30 June 2011

 

2011 2010

 

GBP'000 GBP'000

 

FIXED ASSETS

 

Tangible assets 116,856 118,688

 

Intangible assets 8,626 11,594

 

Investments - -

 

125,482 130,282

 

CURRENT ASSETS

 

Stock 2 2

 

Debtors 5,899 5,640

 

Cash at bank and in hand 8,893 348

 

14,794 5,990

 

CREDITORS

 

Amounts falling due within one year (49,065) (27,568)

 

NET CURRENT LIABILITIES (34,271) (21,578)

 

TOTAL ASSETS LESS CURRENT LIABILITIES 91,211 108,704

 

CREDITORS

 

Amounts falling due after more than one year (20,369) (37,938)

 

NET ASSETS 70,842 70,766

 

CAPITAL AND RESERVES

 

Called up share capital 10,879 10,879

 

Share premium account 120,973 120,973

 

Capital reserve 9,185 9,185

 

The Rangers Bond 7,736 7,736

 

Revaluation reserve 57,207 57,770

 

Profit & loss account (135,138) (135,777)

 

SHAREHOLDERS' FUNDS 70,842 70,766

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Net debt at 1 July 2010 (27,074)

Net debt at 30 June 2011 (14,051)

 

The financial information presented above has been extracted from the draft unaudited report and accounts of the Company for the year to 30 June 2011. The Company's auditors have not yet finalised their audit report.

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So we made a profit of only £76K despite being in the CL, due mainly to the £3.27m tax payment in respect of the Discount Option Scheme, which isn't even specifically mentioned in Whyte's report.

 

We have net debt of £14m, presumably mainly due to Whyte's company.

 

The auditors have not signed off on the accounts yet, presumably because they want to have a better idea as to the outcome of the tax case. You have to wonder when they will do this, which will allow an AGM to be announced.

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So we made a profit of only £76K despite being in the CL, due mainly to the £3.27m tax payment in respect of the Discount Option Scheme, which isn't even specifically mentioned in Whyte's report.

 

We have net debt of £14m, presumably mainly due to Whyte's company.

 

The auditors have not signed off on the accounts yet, presumably because they want to have a better idea as to the outcome of the tax case. You have to wonder when they will do this, which will allow an AGM to be announced.

 

I suspected this would happen with the auditors, or that we got a qualified audit report with a going concern issue.

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So Bluedell, Craig, what does this mean in layman's terms for those of us who aren't accountants? Are the club's finances looking more bleak than expected? Is not having the backing of a bank a good thing for the club? Anything else you can explain or give us your thoughts on?

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Our expenses rose more than our income; our trading profit is down £2.8M; our operating profit is down £3.8M; the Gain on disposal of player registrations £4.2M was mostly eaten up by the Taxation of Discount Option Scheme £3.2M; Profit before interest and taxation was down £3.4M; Profit on ordinary activities was down £4.1M; none of that is good news.

 

However, I think the most important thing to note is that Amounts falling due within one year have gone up from £27.8M and now stand at £49.1M; whereas Amounts falling due after more than one year have gone down from £37.9M to £20.3M. I suspect that this reflects the fact that we no longer haver the BOS Term Loan that we were paying off at £1M/year and now owe that money to Mr Whyte or his company.

 

Whether that is good or bad news might depend on your view of banks and your view of Mr Whyte.

He is of course committed to writing that debt off if we win the big tax case, if not he becomes a creditor in the administration.

 

My personal opinion is that I would rather know I have to pay of a million a year but others may not agree.

 

I do not think that not having the backing of a bank is good because we may need loans or working capital in future and at the moment it is not clear where that would come from.

 

I am a little unclear about the figures for Cash at bank and in hand from the way have been copied on here but it does appear that we do not need an overdraft at the moment, should be able to pay our debts as they fall due (so why all the court cases?) and hopefully the cash in hand £8.8M or £14.8M? is not in a biscuit tin.

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When are the club expected to have a finalised audit report and audit opinion? Say the outcome of the tax case is that we win but HMRC appeal, we are still in a positition of uncertainty. If we lose but appeal ourselves, would that be a different matter in terms of going concern status?

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