• Plans to make £10million worth of efficiencies in running of Rangers
  • What is the situation with UEFA and FFP regulations?
  • Moving towards a break-even point whilst investing in players

Steven Clifford spoke to Rangers chief finance officer James Taylor to discuss a range of money matters at Ibrox. Here is every word he had to say.

Can you give us a description of your role and your working day in your position at Ibrox?

Yeah, absolutely. Thanks for the invite and I am looking forward to the discussion. My role here is chief financial officer here at Rangers, joining just at the start of September. Effectively my role entails being responsible and accountable for all aspects of the financial performance of the football club. In addition to that, I also have company secretarial duties alongside helping to support the AGM, run the AGM and supporting the board through various different decision making processes as well. It is quite a big role, there is a lot of responsibility attached, a lot of responsibility that I take on personally. It has been an interesting few months and looking forward to the coming months and years.

On reflection, can you talk us through the results from last year and highlight the main positives and areas of improvement that the club are embarking on?

On a headline level, we did generate an operating profit so we highlighted that at the time. It was a £250,000 operating profit post player trading. And I will make the distinction between post player trading and pre player trading quite a lot probably throughout this conversation. That £250,000 was the second consecutive year of operating profit and given where the club has been and where we are now, we have got to take that as a positive. Again, in addition to that, the revenue numbers were strong, they were above £80million again for the second year in succession and I think, for me, that is something we want to continue to build on, that we are certainly continuing to see growth in this year as well. We are quite excited by the continued commercial growth of the football club. The challenges around your point of where we look to improve, I think the chairman at the AGM was quite clear around the fact that pre player trading – and when I say that I mean before any player gains on sales are recognised and last year we had Bassey and Aribo to name two – and that is offset by player amortisation.

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So any cost that is associated with the players cost goes onto the balance sheet and when amortise that over the length of the contract. Before we take those into account, there was a £10million operating loss at the football club. That is something that the chairman set out at the AGM and said he wants to go away and that is something that we as an executive team, as a board, as a football club as a whole, are determined to do over the next strategic cycle. There is a lot of work to do to bring ourselves forward and when we touch on some of the player trading aspects in terms of this conversation, people will understand why that is an important line for us, the pre player trading line. I am sure we will get into that. For me, as we move forward through this next strategic cycle, moving to a break-even point pre player trading is something that we feel is eminently achievable and is something we want to deliver.

How do you deliver that? £10million is not an easy deficit to just click your fingers so what can we do as a football club to try and close that gap?

Absolutely. It is a very good point. There are a number of things and we can talk down the P&L from my perspective. First of all it is about revenue growth, how do we deliver positive, margin generating revenue? That might by on the commercial side, that might be in European competition, that might be in domestic competition in terms of improving our performance. But that will have an uptick in terms of moving away or taking away some of that gap. In terms of how we structure the football club moving forward and how we look at the quantum that we put into first team, into academy, into women’s football, we need to make sure that is sustainable moving forward as a football club. And then ultimately there are other areas of cost efficiency that we need to get into.

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One of the key tasks for us as a football club as we move into next season is how do we ensure that we are getting the best bang for our buck, if you will, across the club? Are there things that we have been spending on that we don’t need to spend on and that can be better utilised elsewhere? Is there a strategic spend that we can invest in different parts? That might be in the first team, might be in the women’s team, might be in the academy, might be in the wider business. How do we get better outcomes for the football club going through those cost optimisation exercises? There are a number of different facets around how we make that go away. I think you will see across various different football clubs that that is a challenging target, to be clear, but I think it is one that we should set ourselves and that we believe as an exec and a board that we can deliver against. It will likely take the first half of the strategic cycle to really deliver on that and deliver on that consistently but we do thing that we are on the right path. The changes that we have made in the first four or five months, we are seeing the outcomes of those. But it will take a little bit of time to make sure that we have that sustainable number moving forward and making that £10million go away.

You mentioned at the fan forum that FFP was passed with no problem but where do the club stand with UEFA? It has been mentioned that were on a financial watchlist. Are we past that now?

It is a good question. I will probably touch on this in a few different areas and touch through some of the pillars that we are talking about. As a football club, you are right, we were on a financial watchlist with regards to UEFA from the CFCB in relation to last year or a couple of years ago and it was specifically around a particular accounting adjustment. It was perfectly within the rules but it was something that was bringing revenue back from a Covid position that automatically, effectively, makes you go onto a watchlist. That was the case and I think UEFA rules are moving forward, they have progressed. The regulation within UEFA has changed now from what we define as FFP to something that is along the lines of UEFA club licencing and UEFA monitoring. From a licensing standpoint, as long as we have a positive balance sheet, then from a purely financial angle, and there are a number of other things that go into it, but from a financial angle that would tick that box and we are comfortable there with regards to our balance sheet as it stands today. In terms of the UEFA monitoring, and you mentioned the word ‘worry’ and that is something that I want to make sure doesn’t go away from my vocabulary because I need to be on top of these things. This is something, the accountability, is something that I take very seriously. From a monitoring standpoint, there are three pillars and we are effectively covered by all three. The first one is overdue payables so we need to ensure that there are no football debts outstanding – transfer fees, contingent transfer fees, what have you.

So, that is when you sign a player and you do three instalments?

Exactly. On a quarterly basis, we have to make sure that by a couple of weeks afterwards we have cleared all of our football debt. That is something that the football department and finance department work hand in glove to make sure that we are on top of that and we continue to be on top of that. The second one is around football earnings. So this is what you would typically define as FFP and what you see down south in terms of Everton and Nottingham Forest and some of the challenges down there. That is in terms of the losses that you make over a period of time so there are – and I won’t bore you with it – a number of different add-backs that you can put in for women’s football, for academy football, for community investments that are allowable investments. You take your number effectively on a profit and loss basis and then add back a number of those investments and you have a tolerable level, ours is five million euros. So making sure that we are within that, and certainly in terms of the numbers that we posted last year we were within that tolerable level. We are comfortable with that. That is one that we really need to keep an eye on as we move forward because a club like Rangers, in the macro-environment that it is in from a commercial angle, is different to a Fulham, a Brighton, to anyone down south because of the value of the media revenues that we have here versus the value of the media revenues in England. If we have a good European season, or if we have a bad European season, it can significantly impact on some of those football earning ratios.

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So it is important for us that when we are making investments, when say we qualify for the Champions League, we need to make investments on a sustainable basis. So that if, for example, the season after we go into the Europa League, we don’t have a blow out in terms of our football earnings. That is something we are very close to and on top of. The third one, which again I think most supporters will be aware of, is the squad cost ration. This is where effectively you are looking at all of your player costs, your football management costs and associated earnings and looking at that against your revenue. A couple of add backs, a couple of adjustments here and there again, but broadly the way that UEFA are implementing this is over a three-year period. This year you had to be at 90 per cent, next year it is 80 per cent and the following season it will be 70 per cent and it will stay at 70 moving forward. Our current ratio is well below 70 per cent so we are comfortable where that stands. This is why revenue growth for this football club has been so important in recent years, it really gives us a platform on which to build, a platform that we can move forward with confidence in terms of signing players, in terms of investing in the first team, in terms of making sure that the product on the park is as good as we can make it. All of those, individually, we are comfortable with at the moment. That doesn't mean to say that we should be relaxed about it. We need to be on top of it, we need to continually assess and make sure that we are where we need to be. But from a UEFA standpoint, we feel that as a football club we are progressing. We have got a really good relationship with UEFA, we maintain that relationship with UEFA and I think that is important as we move forward as well.

How do we budget for a player spend if we have a modest profit in recent account? How do we budget to sign Mohamed Diomande, for example, for £4.5million in the summer?

It is a good question. I will answer it in a couple of different ways. First and foremost, I mentioned in terms of player amortisation and again this is a slightly technical aspect. When we look to invest in a player, that player is effectively an asset to the football club. Therefore we would recognise the cost of that player over a three or four year period depending on the length of the contract. We have to take a view in terms of players rolling off, players rolling on and take that live view over a period of time and ensure that we can provide the football board – John, James, Nils, etc, the manager -  with the best quality of information that they have going into a transfer window, so that when a player like Diomande appears, or Cortes appears, that we have the confidence to be able to go forward and push forward knowing how that will impact our squad cost ratios, how that will impact our football earnings position over the coming season, over the coming four and a half seasons in Mo Diomande’s case.

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For us it is about having that live view and we talk about data quite a lot on the football side in terms of building player profiles. For us as a business it is important that we use data as much as possible and that real time data as much as possible to ensure that from a financial standpoint we are where we need to be, not only today but also tomorrow. In terms of how we deliver that through the accounts, there is a period of time that we recognise that. In terms of the cash position, again we have made a number of sales in recent years and you referred to the timing of transfer fees, whether it be three or four instalments or whatever it may be, and again that is no different. We have still got, as we mentioned, Joe Aribo and Calvin Bassey just recently. Again there are funds there that we will look to utilise and build the squad with. While we recognise it in one year, the cash benefit comes through a number of different years. As I say, it is important that the football board and the finance world are fully joined up and I think we are beginning to see the merits and benefits of that football board as we move forward.

Is there scope for more investment from the club’s big investors? How would that work against FFP and is that achievable for the club?

One of the things that licencing and monitoring is build on… I mentioned acceptable deviation. If we go outside the acceptable deviation, then one of the ways of fixing that is through equity investment. You will see a number of equity investments down south from various different football clubs. For us as a football club we have got make sure that we have the right equity position on the balance sheet moving forward. What we want to do is move this football club to a sustainable business model where you don’t rely on equity investment moving forward for, perhaps, working capital requirements. But if we do attract any equity investment moving forward, it is to grow the football club, it is to grow the value of the squad, grow the size of the stadium, whatever it may be. We will take those decisions if it is something that would benefit the club in the long run rather than necessarily, and understandably so, has been done historically to invest in the football club and bring Rangers back to approaching where we need to be. There is always scope for that. For me, it is about making sure that we have a sustainable business model and that we are not relying on that equity investment. Instead, if that does come, we are using it in a positive manner.

What are the projected costs and income for the new sports bar and does that help against various aspects that we have to hit?

You can have adjustments around finance costs. Absolutely you can do things like that, that would be the finance cost element rather than the total amount. For us as a football club, the investment in the campus is something that we have all seen in recent years. We have seen New Edmiston House, the Blue Sky Lounge, how we are looking to try and evolve that matchday experience and drive improvements for everybody within that matchday experience. The sports bar, for us, is one aspect of that. We are working through the final stages of the financing of the sports bar and it is something that are still committed to and still want to deliver on. In terms of the revenue impact and what that looks like, I think, for me, if you look at the Edmiston House delivery and opportunity moving forward and the events space that it is, we have a real opportunity to drive a lot of growth through there. For me, the sports bar is almost a ‘let’s make sure we deliver that matchday experience for the supporters’. How do we deliver something that people want to come to and want to spend more time on campus? For us, that is really the driver behind that investment. The operating model, how that delivers, when it is opened, the nature of that is still being discussed and still being finalised. We are still committed to being able to deliver that and it is something we are all very excited about.

How would you describe the financial shape of the club? Are we comfortable with the trajectory?

I think, again harking back to the revenue point, if we take a step back and look over the last six, seven years in terms of the revenue growth of the football club, it has been super strong. We should all be really proud of that. Supporters make it happen, in terms of the strategy of the club, how it has been delivered, I think is really, really impressive. What we are doing as a business, as I mentioned and what is probably coming across here, is that we are maturing, effectively, as a business. We are driving a little bit more cost optimisation into the model, we are trying to make sure that we have this sustainable business model moving forward that we can execute on over the forthcoming five year cycle. For me, it is about how do we ensure that in the shortest timeframe possible? At the same time, if I look at other football clubs, whether it is down south, whether it is in Europe, and I look at the nature of the funding that they are taking in versus the nature of the funding that we have, it is very, very different. We have a very supportive board, we have minimal external debt compared to other football clubs and those investor loans, the investor equity and capital that has come in, we are actually in quite an enviable position as a football club.

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That support from the board allows us to look at players, allows us to accelerate our position in terms of getting ourselves back to where we all want us to be. Moving forward, for me, and what I want to mention in terms of moving away from equity and potentially using it for working capital to potentially utilising it for working capital projects. Again, I want us to minimise the working capital gap, I want us to make sure that as a football club we know the direction that we are travelling in and we have the confidence and ability to hit that sustainable business model within the next two or three years. How would I describe it? Continuing to improve, I guess, is my perspective on it. It has been really impressive in terms of the revenue growth. For us now it is about maturing the remainder of that business model and driving that sustainability.

When do we expect to turn a profit regularly and be self-sustainable?

Short answer to that one is as soon as possible. I think the longer answer to that, and I touched on this and it is probably a good place to reiterate around the controllable aspect of the business, the player trading aspect in terms of how we see it through the P&L. Where should we land in a Champions League season versus a Europa League season will be very different. If we are aiming for a break even position in a Europa League season, and I mentioned earlier on around the risk of perhaps over-investing in a Champions League season. Perhaps in a Champions League season there is a model that says we run at a larger profit, which will help us in future years from a football earnings standpoint because it is taken over a three year average. That is a potential model. But we really need to get into the meat around what that looks like over the next three to five year cycle, which is the work that James and I and the rest of the exec board are really getting into at the moment. That Rangers 2030 strategy, which we will be delivering over the forthcoming months, is really about how we deliver a business model, a shape is probably the way I would describe it, that delivers us to break even pre player trading. Some years, in terms of the bottom line and post player trading, that might be a loss. Some years it might be a profit, again depending on the player gain or otherwise that we recognise in that season. To answer your question, probably not very helpfully, is, from my perspective, pre player trading, we want to get to break even but the bottom line sometimes it will be a profit, sometimes it will be a loss. A Champions League year we would want it to be a profit but the years of £10million losses, this exec, this board, are absolutely adamant that we are moving forward and moving away from that and making that go away. I think the support, the revenue growth, the support of the supporters is fantastic around the continued backing of what we are trying to achieve as a football club. This doesn’t go away, that number doesn’t go away, without the backing of the supporters and we need to really continue to recognise that, continue to improve the matchday experience, continue to deliver the best possible product we can on the park every Saturday. That is what we are all dedicated to doing.

Are we heading towards normality and we are now seeing stability?

Stability is a good word. I think stability is a good word. Stability is a word we should be aiming for. We had, in terms of the accounts, a couple of quarters were described as relatively boring last year. I like that. As an accountant, I do like it being boring. From my perspective, if we can get more stability, more maturity in the business model… I think I am seeing a lot of that in the club now and I am super confident that we will be able to drive that moving forward. Stability is a nice word to finish on.