Ladies, gentlemen and fellow shareholders it is again a privilege for me to thank you for your attendance in such numbers at your Company’s AGM.
It continues to be a humbling experience for everyone on this podium to come here and witness the commitment you all show to our Company and to The Rangers Football Club.
The Company’s AGM is an important meeting. It allows shareholders to hold the Board accountable for the manner in which the Company’s business affairs have been conducted in the most recent financial year- in this instance the year ended 30 June 2019. As you are aware, the sole business of the Company is its investment in The Rangers Football Club Limited- which is a wholly owned subsidiary of the Company.
In addition, much has happened subsequent to the financial year-end that is of interest to our shareholders and I will deal with that later on in this address.
After conclusion of my speech there will be an opportunity for shareholders to ask questions of the Board and the Club’s management. Unsurprisingly, many of the questions are directed at the on-field football activities rather than the financial statements. The Director of Football and the Manager are available today to deal with such questions- albeit Ross was only appointed after the period under review.
At prior AGMs I emphasised that our shareholder base included passive investors who are not supporters of the Club and invested solely on the investment case made to them at the time of their investment. When I spoke at our first AGM following regime change this proportion of investors was extremely influential to the extent that they blocked key resolutions that I wished passed at that AGM. But, with the substantial share issues over the last few years the Company has become dominated by supporter investors who clearly want the Company to be a successful trading entity- but not at the expense of the on-field activities. I am much happier with the present shareholder mix as it is the on-field activities that ultimately drive shareholder value.
On the subject of shareholder value, I have repeatedly made clear that it was necessary to incur losses for a number of years until we were able to rebuild the Club and thereafter benefit from the substantial upside in value that this could generate. In the medium to long term a viable share price is essential if we are to fund future growth at affordable prices to the Club as we continue our progress to compete at ever more challenging levels.
Today is my fifth AGM as Chair since regime change. That realisation led me to conclude that it will be helpful if I summarise for shareholders where I consider the Company and the Club to be at the present time. This comparison is relative to what I outlined and hoped for when I re-engaged with the Club 5 years ago in an attempt to reverse the downward spiral that it was experiencing at that time.
At the outset I would like to state that when we look back on where we came from to where we are now, I think we can all be satisfied. Not complacent, but satisfied.
Now, you may rightly wonder how I can stand up here and express satisfaction about a company that announced accumulated losses of over £25 million pounds for the last two years alone. Frankly, as someone who has spent almost four decades building and operating profitable businesses I surprised myself when the word “satisfied” came to my mind when I was preparing this speech. So, let me explain myself.
During media interviews and at each of the last four AGMs I stressed that our business model required us to get back to our historical success levels on the pitch. That was absolutely the only way to create sustainable value for all shareholders while simultaneously meeting the expectations and requirements of our supporters. I also stated that the obvious consequence of our on-field ambition was that your Board would have to approve spending significantly in excess of what we earn for an indeterminate period of time while simultaneously ensuring that funding was put in place to allow for this over expenditure. Put simply, if we couldn’t secure funding then we couldn’t incur losses and without losses we would be consigned to failure on the pitch.
But, on the other hand, I am stating the obvious when I say that no company can sustain losses for too long without the risk of financial collapse. The Board had the extremely difficult task of strategically directing the right quantum of short to medium term losses that could ensure a return to financial stability in the near future.
In this regard I will first comment on the significant losses we incurred since regime change and whether we achieved our objectives by incurring losses of the magnitude that we did.
Let me therefore take this opportunity to highlight some of the achievements that I believe give clear indication of the progress that has been made since my first address to the AGM in 2015.
First however, I will start with a major negative that still hangs over our Club, Sports Direct. I raised this well publicised issue at the first AGM and each year thereafter. Yet, after believing that we had reached a good faith agreement with Sports Direct and Mike Ashley – which I reported on at the 2017 AGM – we continue to be bedevilled by Sports Direct’s ongoing legal assault to retain influence over our retail activities. I cannot go into the detail of this ongoing litigation save to say that, as before, we will continue to fight our corner to ensure that Sports Direct does not benefit from what I consider to be its ongoing bad faith in dealing with our Club.
Fortunately, I can also highlight areas of improvement that could not have been achieved if we had not been incurring losses of the magnitude we did.
When I spoke at the 2015 AGM, not that long ago, I stressed the importance of securing promotion that season from the Championship back to the Premier League. Today, we are not only back in the Premiership but challenging at the top end of that league. That would have been impossible if we had not significantly invested in the playing squad- both with transfer fees and a vastly greater wage bill. Over the last three years alone we have invested in excess of £30 million pounds in our playing squad. This component is by far the largest contributor to our losses.
This substantial investment in the playing squad was achieved while simultaneously investing heavily in Ibrox and Auchenhowie. We have an improved stadium that is debt free and we have upgraded our training facilities at Auchenhowie, which is also debt free. Many of the largest clubs in the world are financially restricted by the debt repayments on their stadium. We are very fortunate indeed not to be in that position.
In my judgement, the present performance on the pitch and the present condition of Ibrox and Auchenhowie are in themselves sufficient justification for the losses that we have incurred since 2015. But, I have an even more compelling case to make. One that gives me a lot of personal comfort, both as a supporter and as a shareholder.
Wearing my supporter hat, I can easily rationalise that the accumulated losses are justified solely by the progress of the team from playing in the Championship to a team that is now capable of challenging for the Premiership (whatever the outcome this season) and a team that is the first in the history of Europe to successfully navigate four qualifying rounds for two consecutive seasons. That European achievement is in itself remarkable whether we advance to the knock out stages or not.
So, purely on the basis of this team performance and the resultant European and improved commercial income, I believe that the value of our company, since regime change, has increased by more than the accumulated losses that we have incurred. But, at the risk of sounding like a home appliance salesman, wait, there’s more.
I have stressed that the largest part of the Company’s losses went to funding increased player costs. Consequently, an important aspiration was to utilise our increased player spend to give us better quality on the park while simultaneously creating a player pool value that is substantially higher value than its cost of acquisition. Mark Allen and the Manager worked diligently to achieve this after Steven joined us at the beginning of last season.
Based on discussions and offers that we have received from other clubs, I have had a personal comfort for some time that the value of our squad is significantly higher than the book value reflected on our balance sheet. I therefore decided, initially for my own comfort, to request the new Director of Football, Ross Wilson, to give me his fair value estimate of the individual players making up the player pool. Ross completed this exercise in consultation with the Manager and provided me with two estimates. The first is the estimate of present market value and the second included a projection as to where some of our players could get to if they continue to progress as expected. The present value of the squad reflects a significant uplift of £55 million pounds over our book value and the projected amount would yield an uplift of £103 million pounds if it eventuates.
I know that these numbers are not scientific and we are certainly not holding anyone to them. But, they are estimates by two individuals who know the qualities of players and who know the market. This exercise validated my own information that the losses we have incurred have been well spent. We have created a substantial economic value that is not reflected on the Balance Sheet presented to shareholders in advance of today’s Annual General Meeting. That is good business by any account.
I will not refer to the Annual Financial Statements in detail as you all have had the opportunity to review them. But, I do wish to mention one key indicator from the year under review that, more than any other, reflects the obvious progress that we have made as a club.
In 2015 I stressed the importance of stopping the supporter boycott and getting back to filling Ibrox on match days. I also highlighted the poor image of our Club and the consequent hesitance of commercial sponsors who were concerned about the stability of the Club and the persistent negative media around our footballing and, more importantly at the time, our non-footballing activities. These factors had already decimated the revenue of the Club by that time.
The present improvement in the turnover of the Company is the single largest measure of the progress we have made through the quality of the team’s performance and the greatly improved image of the Club. It reflects the perfect trifecta of improved team performance, resurgent fan support and commercial sponsors again realising the value of association with our Club. It is therefore significant that we enjoyed a turnover increase of 63% for the year under review. Present indications are that we will show a further increase in the current year that will be reported on at next year’s AGM. It would be unfair of me not to recognise the importance of the Manager to restoring our overall corporate image.
I will now turn to the important topic of funding. If The Rangers Football Club is the body as a whole, then our supporters, Ibrox Stadium and the football team are the vital organs. But, the lifeblood of the Club is funding, and even more so when we have been running a deficit to play catch-up for the many prior years of underspending. I have stressed on numerous occasions how uncomfortable it has been for me and my fellow board members to be overseeing the operation of a business that was making ad hoc spending decisions, particularly during transfer windows, and then requesting investors to put up the cash after it was already committed to. I cannot overemphasise how stressful that has been for me personally and to my fellow directors on the Board as we had to juggle our personal finances to make funds available to the Club at short notice.
It is a private joke between Douglas Park and myself that every time I meet him I ignore the customary hand shake and put my hand straight into his pocket. Thankfully it was always filled with cash.
Now, it was suggested to me from time to time that we could avoid the ongoing stress around funding by agreeing a funding amount in advance of each season and then sticking to it no matter what happens. However, while such an approach is feasible today, as I will come to later, it was not possible for the last few years and would have prevented the Club from being where it is today. I want to give a clear example, because this is a very important issue for shareholders to appreciate.
We are presently enjoying the benefit of a strong progressive manager who has a great support team and who has provided us with a competitive and entertaining team to watch in domestic and European matches. But that is a fairly recent occurrence that would not have happened if prior events did not unfold in a certain way and if the Board had not reacted to them without reference to a fixed budget or funding constraints.
It is no secret that in the last few years we have twice found ourselves in the unwanted position of having to part ways with our football management team. That is never a pleasant experience and is something that has to be handled in a professional manner that is fair to all parties. This inevitably results in an immediate financial settlement to the departing team and often immediate compensation for any incoming manager and his team. Such a substantial financial cost would never have formed part of any agreed funding if a fixed amount had been put in place beforehand. Consequently, the Board would have no financial flexibility to make the changes deemed necessary mid-season and would either compromise or wait for the following season. If we had applied such a restrictive and inflexible funding approach we would not be where we are today.
I could offer more recent and more substantial financial examples, including recently in the transfer market, but I believe I can now make my main point. We would be significantly worse off today if I did not have the backing of a board and investors who made the best decision that would advance our collective ambition for our Club and each thereafter contributed to any additional cost within their personal financial means. At regime change we committed to do whatever it takes and that is what I believe we have done.
I cannot overstate how grateful I am to my fellow colleagues on the Board, Douglas and Graeme, Julian, Barry, John and Alastair who have not only supported this level of flexible decision making but have each contributed funds to ensure this. I also owe thanks to George Taylor and George Letham who, although not on the board, have supported my calls for financial support. I recollect that in my very first interview I suggested that we needed £30 million to “fix” the Club and that I would contribute 50% and the 3 Bears, with colleagues, would contribute the balance. We have all exceeded these initial estimates.
One of the reasons I have spent time dealing with the funding to date is that I wanted to remind shareholders of the approach we had adopted and, in the process, give thanks to my co-investors. The second reason is to announce today that there is no longer a need to continue with this ad hoc funding approach.
Since year-end myself and my co-investors have made further substantial funds available to the Club to meet our present commitments arising from the summer transfer window. Furthermore, the funding sub-committee of the Board, comprising John Bennett, Julian Wolhardt, and George Taylor as an external advisor, are working on the final funding requirement to meet the run-off of our present committed shortfall. This will incorporate our expectations for the January transfer window. This funding initiative will follow approval today of the resolution to issue new shares which I am certain will be adopted.
Thereafter there will be no further need for the Board to fund on the ad hoc basis that was necessary while we were navigating our way out of the Championship to where we are today. Going forward, the Board can re-adopt the traditional method of financial planning. That will mean that commencing with the summer transfer window the Managing Director, the Sporting Director and the Manager can sit down with the Board and get an approved financial plan covering player incomings and outgoing and then just get on with it.
Our ad hoc approach served us well to get to where we are today but we must now look forward with a more balanced and consistent approach to funding. Commencing from the end of this financial year there is no longer a strategic need to incur losses.
I also want to point out another critical improvement at our Club. In 2015, after the removal of the previous board, the Club had no executive management structure whatsoever and a vastly insufficient and demoralised staff. Things have improved dramatically since then and as I look across the podium today I can see by far the strongest combination of a board and executive management that I have experienced since I was first appointed to the Board 20 years ago.
We finally have a strong operating board at the football club level that, following yesterday’s board meeting, has now been empowered to drive the Club forward. Henceforth, the football club executive will work within an agreed operational and financial plan and without the restriction and uncertainty of constant reference back to me or other members of the holding company to find out if funds are available. That is a huge step forward for our Club from where we have been over the last number of years.
A consideration of our more devolved decision making has made me reconsider the question as to whether there continues to be benefit in a holding company for The Rangers Football Club versus the more traditional model of a single operating entity with a board that comprises executive and non-executive directors. I have therefore asked the company secretary to investigate the possibility of dismantling the holding company and issuing shareholders with the equivalent shares directly into the football operating company, The Rangers Football Club Limited. I would certainly rather own my shares directly in the football club. Further announcements will be made in due course if this proves to be viable and desirable.
I now want to address some areas of our Club that are important to the values that we believe in but do not get the profile they deserve.
I start with our women’s football team which has been neglected for far too long. Last year I announced significantly increased funding to bring the Rangers women’s team to a new level and to integrate it fully into the Club. I have personally advised Amy McDonald that we will continue to give disproportionately large investment increases to our women players. This provides us with a framework to develop the team to become a significant force, not just in Scottish football, but also at European level.
During the year we launched the Everyone Anyone initiative, which has been positively and widely received, even by our country’s politicians. This project is one of the most ambitious we have undertaken and it will highlight just how diverse and open our support actually is – Rangers is a Club for all and it is vital to our future that our supporters recognise and embrace this.
I also want to recognise the further significant progress of our Academy under the guidance of Craig Mulholland. Over the last few years the Academy has gone from strength to strength and will undoubtedly become a source of considerable talent that will emerge to play in our first team. The Academy progress is most encouraging for the Club and has the full backing and support of the Sporting Director and the Manager.
The Rangers Youth Development Company is an important funder of our Academy and, to date, has contributed almost £8.5 million pounds towards our Club. In addition to supporting the Academy, profits earned from the Rangers Pools are ring-fenced exclusively for the upkeep and maintenance of Ibrox Stadium.
I thank the Rangers Youth Development Company – which is directed so well by Colin Stewart – for their continued commitment and support.
I also make special mention of the Rangers Charity Foundation which is overseen by Connal Cochrane. Supporters are at the heart of everything we do at Rangers, and this is most evident in the life changing work of the Foundation.
This season, the Foundation’s work within the community around Ibrox continued to grow – with 25 projects centred on education, employability, health and wellbeing, diversity and inclusion and supported a total of approximately 10,500 people. This outreach is quite remarkable.
All of this important work is delivered by a relatively small but extremely hard working team, which makes the Foundation’s accolades all the more impressive. The most recent accolade is the prestigious international Role Model Social Responsibility Award from the ‘Football is More Foundation’, which sees the Rangers Charity Foundation follow in the footsteps of Chelsea, Benfica, Real Madrid and Paris Saint-Germain who were all recognised in previous years.
I also pay tribute to members of the Rangers family that passed away during the last year. We give our thoughts and best wishes to the families of Johnny Valentine, Eric Caldow, who was in the first Rangers team I ever watched, Fernando Ricksen and Joe Mason.
I welcome the opportunity to thank my colleagues on the Board and the management and staff throughout the Club for their continued support and dedication over the past year. It is a genuine privilege to be a member of a board that demonstrates such commitment, time and effort for no financial reward whatsoever. Having worked with individual board members since regime change, I am truly in awe of the continued willingness, often at extreme short notice, to put the interest of the Club ahead of themselves. To be able to perform a duty for the Club is sufficient reward for each of them.
I owe special thanks to Douglas Park who has been of immense assistance to me over the last year in his role as Deputy Chairman. A lot has been going on in Glasgow that could not easily be dealt with without the assistance of someone on the ground, thank you Douglas.
Additionally, although not on the podium today I want to express my gratitude to John Gilligan and Paul Murray, both of whom were instrumental in securing regime change and then supporting me on the Board in the early years.
I end on a personal note. Looking back at previous AGMs in preparation for today I was reminded, as if I needed reminding, of my reluctance to get involved with the Club during those dark days. I had already served on the Board for many years and I had lost £20 million pounds while doing so. I was witness, while on the old board, to the bank driven sham sale to Craig Whyte which Alastair Johnston worked so valiantly to expose. I then watched in horror from South Africa as the Craig Whyte era hurtled our Club into administration.
When Mike Ashley subsequently became involved I was initially comforted by my awareness that we finally had someone with the financial muscle to take the Club forward. His subsequent behaviour in not doing so continues to perplex me. I still fail to truly understand, despite the perceived benefit to Sports Direct of dealing with a weak board, why Mike Ashley propped up the old regime. To my mind, a successful Rangers would have been of far greater value to Sports Direct and Mike Ashley had the financial muscle to achieve this. This must be one of the rare occasions when Mike Ashley was too timid.
The Club continued as we know, to spiral downwards and after Douglas Park and Chris Graham reached out to me in desperation in 2014, I decided to rethink my possible involvement. As I made clear in multiple media interviews at the time, re-engaging with the Club was not a positive expression of something I wanted to do or would look forward to.
At that time my South African businesses and my international businesses were growing rapidly. My adult children had just joined me in the holding company and working closely with my children was something I had very much looked forward to for some years. There were also other private time constraints on my willingness to commit the substantial time and travel for me to take on a project of the magnitude that faced Rangers at that time.
I took some time, before deciding, extremely reluctantly, to enter the fray and take a leading role in removing the previous regime. It was ultimately a sense of duty to present Rangers supporters and to the memory of those that had gone before that overcame my natural resistance as I was fully aware that if we were successful in removing the old Board that I would need to follow that up by committing my own time and financial resources to the recovery period. I was fully alert to how daunting and time consuming this task would be, particularly for someone not resident in the UK as it would add substantial overseas travel to an already extremely busy schedule.
I have stated in public many times before, being Chairman of Rangers is not an experience I have been able to enjoy. It always remained a duty. Dealing with the Sports Direct legal issues was extremely time consuming and frustrating. Mike Ashley’s attempt to have me committed to jail for speaking ill of Sports Direct in a TV interview was certainly a low point. The fact that the previous board and other parties agitated with the Takeover Panel in an effort to have me excluded from assisting in Rangers recovery created many personal complications for me with the exchange control authorities in South Africa and cost me over a million pounds in wasted litigation costs related to my status to make the offer.
In fact, the South African exchange control involvement in reviewing what was going on at Rangers had a subsequent negative impact on the Club. Since year-end I put in an additional £5 million pounds to assist with the immediate funding of our summer transfer business. The South African authority would not approve a further investment in shares in Rangers and eventually only approved a loan on an interest earning basis. That is one reality I face from living in a country that continues to have capital controls.
However, as I highlighted earlier, the crisis is now finally behind us and normal activities can resume. In order to have smooth succession planning I therefore advised the Board last month that this will be my final AGM. The hard work of recovery is now done and I intend to step down from the Board in the new year as soon as the new funding round has been concluded by the sub-committee and the new devolved operating structure for the Club that was approved yesterday has been fully implemented. I estimate that will take about four months.
I now look forward to paying more attention to my South African and international businesses and to finally having the time to work with my children in the manner I had intended before my duty to Rangers put that plan on the backburner. The South African economy is very tough at the moment and it is time that I redirected much more of my attention to my private affairs.
I would not step down if the Club continued to need my services and support. But it doesn’t.
I thank all of our shareholders and fans for the absolutely magnificent support I have received. Despite the personal trials and tribulations, I want to state that being the Chairman of Rangers has been, by far, the greatest privilege of my business life and I will continue to use my shareholding influence to support the Club and its board.
I will also continue to represent Rangers on the board of Rangers Retail Limited until conclusion of the litigation with Sports Direct, however long that takes.
I will now open up the meeting to questions.