How are Sevco affording Sandaza?

I’ve had a few tweets over the last few weeks asking me to do one of my analysis’ on Sevco’s finances and whether they have a sustainable business.  I hadn’t really put much thought into it, until they signed Fran Sandaza last week.  There was another good analysis done a while ago by @Auldheid, before these figures were available, and it seems we have a very similar model.  Check his model here.

For non Saintees reading, Fran was our top scorer last season – in fact, our top scorer since the days of Paul Wright.  He was simply a class above the rest of us, and we knew he was on his way.  He had repeatedly said he wanted to play at the top level – the Premiership, or maybe La Liga.  At 27, most fans were wishing him good luck and thanks for the goals.

So to see him sign for a team 4 divisions below us (edit: ok, time for a counting lesson… 3, 2, 1, SPL… how many divisions did you count?  4?  Great, let’s move on), on a reported wage 10 times what Saints were able to pay (4k a MONTH – 4th to last paragraph), its quite frankly, insulting.  He will waste the best years of his career playing against part timers when he should be challenging the best defenders in the world.  99% of us would have done the same though, so lets focus our energy back on Sevco…

…just how can they afford to pay 10 times what another SPL club can?

Thankfully, Duff and Phelps step in here – one of the more useful things they did was provide a nice breakdown of expenses during their administration.  Now, bear in mind an administrators job is to provide the best return for the creditors.  To do this all expenses while trading should be kept to the minimum, so the numbers I am using to estimate expenses should be more or less the lowest achievable while playing at Ibrox, irrespective of division.  The below table details the expense from the D&P report, along with the calculated yearly figures:

Trading Receipts and Payments Account
The Rangers Football Club Plc
In Administration (4 months) 5 months 12 months notes
Ticket Sales  £  2,014,404.00  £    5,036,010.00  we recalculate based on new pricing
Programme Sales  £        71,797.00  £        179,492.50
Hospitality Sales  £      267,728.00  £        669,320.00
Food and Beverage Sales  £      388,973.00  £        972,432.50
Stadium Tours  £        23,001.00  £          57,502.50
Sponsorship Income  £      753,033.00  £    1,882,582.50
SPL Income  £      519,200.00  £    1,298,000.00
Other Sales  £      394,850.00  £        987,125.00
 £  4,432,986.00  £  11,082,465.00
Direct Matchday Costs – Home Games  £      102,609.00  £        256,522.50 together
Direct Matchday Costs – Away Games  £        55,317.00  £        138,292.50
Payments to Football Clubs – Away Tickets  £      508,604.00  £    1,271,510.00 not account income for this. Ignore
Security / Policing  £      515,157.00  £    1,287,892.50 I reduced slightly for no old firm
Programme Costs  £        18,765.00  £          46,912.50
Audio Visual Costs  £        59,286.00  £        148,215.00 together
Media costs  £        54,070.00  £        135,175.00
Medical Costs  £          9,254.00  £          23,135.00
Football in the Community Costs  £        43,831.00  £        109,577.50
Charity Match Costs  £      153,512.00  £        383,780.00 ignored
Friendly Match Costs  £        15,445.00  £          38,612.50 ignored
Player Agents Fees  £          6,270.00  £          15,675.00 ignored, but would come under transfers
Legal Costs/SFA Appeal Hearing  £        24,800.00  £          62,000.00 ignored
Pre Administration Wages/Salaries  £      479,513.00  £    1,198,782.50 recalculated
Post Administration Wages/Salaries  £  2,299,658.00  £    5,749,145.00
Sub Contractors  £        24,400.00  £          61,000.00 ignored
Staff Expenses  £        34,319.00  £          85,797.50 under pension/accom
Player Accommodation  £        53,078.00  £        132,695.00
Other Employee Costs  £        31,589.00  £          78,972.50
Pension Contributions  £      107,802.00  £        269,505.00
PAYE/NIC  £  1,752,972.00  £    4,382,430.00 recalculated
Facility Costs / Repairs and Maintenance  £      221,505.00  £        553,762.50
Catering / Food and Beverage  £      991,155.00  £    2,477,887.50
Lease / Hire Purchase Payments  £      343,046.00  £        857,615.00
Utilities  £      256,219.00  £        640,547.50
Merchant Services Commission/Charges  £        22,677.00  £          56,692.50 under misc
Cash Collection/Banking Services  £          2,870.00  £             7,175.00
Stationery/Postage  £        31,810.00  £          79,525.00
Software Licences/Trademarks  £      111,116.00  £        277,790.00
Waste Disposal  £        50,665.00  £        126,662.50
Fuel Costs  £                97.00  £                242.50 under misc
Petty Cash  £          7,700.00  £          19,250.00
Sundry Payments  £              250.00  £                625.00

The two main factors in whether Sevco are solvent or not would be the crowd numbers and the wage bill.

Lets start with crowds and income.  We will base this on a slightly reduced East Fife attendance figure – just a few thousands off – to allow for those who will drift away after the ‘historic first game’.  So, 35,000 average attendance.  Lets estimate that 25,000 of those will be season ticket holders, at 260gbp a time (from most media reports – exact pricing not on the Rangers website).  The remaining 10,000 will be match day ticket purchasers, while 10% of the number will be children paying less for their tickets.  This gives us,

We then need to factor in the ‘other’ income streams.  From the creditors report, it gives us an idea of what to expect in this regard.  I have kept income more or less constant here, despite the fact hospitality and sponsorship is bound to fall without the top league exposure.  As an ‘associate’ member of the SFL, they are NOT entitled to any TV money.  But we have given them their 1/30th share of it anyway…

So that gives us a total turnover of 12.7m.  Not bad at all, and significantly higher than most SPL sides.  Lets now look at the expenses likely to occur.

Again, from the creditors report we get a good idea of the different expenses.  As their report was over just under 5 months, I have multiplied all expenses by 2.5 to estimate the yearly spend.

The total here comes to 6.875M GBP.  So still plenty left to pay the wages.  To give you an idea, Saints wage bill is around the 2.5m mark, so, you can see, Sevco should be able to make a healthy 7 figure profit while still having an SPL standard squad.  But let’s now look at what they are reportedly paying.

A few assumptions first.  The SFL allows a squad of 22 players, so that is the number we have used.  I have not included any reserves or youth’s outside this number.  As of August 9th, the site is showing 18 first teamers, and 24 reserves and youths.  They also have a large academy structure, which I will assume is paid for under the ‘football in the community’ costs.  The figure of 18 first team players also does not include Sandaza, Kyle or the Brazilian defender signed on Monday.

Firstly I took the ‘big name’ players and assigned them a wage.  I am taking roughly from media reports which have their wages anywhere between 5000 and 10000 a week.  I have used the lower number.  For the ‘other’ players I have taken a wage of 500/week.  This is probably far too low for players like Perry and Hegarty, but, we’ll use it all the same.  This gives us this…

As you can see I have used 5k for everyone except McCulloch.  The 10k figure is a reduction of 50% on his reported wage pre administration of 20k.  He is quite possibly still on 20k as he TUPE’d across, and this allows him to keep the same contract terms.  This gives a squad average wage of 2568 a week.  Over a year for the 22 players it would be just over 2.9M.   We then need to factor in pension, accommodation and other costs as detailed in the admin reports.  There is also a large backroom staff and office staff, accountants etc on the payroll, which we have estimated below.  This is probably a low ball estimate, as McCoist and Durrant are also included in this figure, which also needs to include ticket staff, ground staff, office, directors pay amongst others.  So, how does this affect the bottom line?  Well, we’ll put together the full accounts now, and show you where it leaves Sevco.

Match income  £    8,712,500.00
Sponsorship  £    1,500,000.00
TV  £          50,000.00
Programme sales  £        150,000.00
Hospitality  £    1,500,000.00
Others  £        800,000.00
Total income  £  12,712,500.00
Player salary  £    2,938,000.00
Pension/accomadation  £        550,000.00
PAYE/NIC  £    1,469,000.00
office staff/coaches  £        750,000.00
Total wage  £    5,707,000.00
match day costs  £        400,000.00
Security/Police  £    1,000,000.00
Programme costs  £          45,000.00
AV/Media costs  £        250,000.00
Medical costs  £          20,000.00
facilities cost  £        550,000.00
catering costs  £    2,500,000.00
lease/hire agreements  £        850,000.00
utilities  £        640,000.00
waste disposal  £        120,000.00
software/licenses  £        250,000.00
football community  £        100,000.00
misc costs  £        150,000.00
Total expense  £    6,875,000.00
Total costs  £  12,582,000.00
Minus VAT  £    2,351,812.50
Profit/Loss -£    2,221,312.50

As you can see… we have a big red figure there.  Sevco simply can’t afford the players.  But I’m not finished.  The eagle eyed will have noticed that a few players, notably the Americans are missing.  Now, while reports say they will be leaving, they have not left yet.  They are under no pressure to leave, as they have valid contracts.  So let’s factor them in.

So another million loss, unless they can move them on.  Lets now look at what they need to do to breakeven.

Total income  £  12,712,500.00
Player salary  £    1,683,791.67
Profit/Loss  £                          –  
Av wage to breakeven  £             1,471.85

The questions that need to be asked:

  • Did the SFA ask to see these numbers?  Did they sign off on them?
  • How did Sevco show they were a sustainable business without audited accounts? Have they posted a financial guarantee they will see out the season?
  • Who is funding all this?  Who are the shareholders?  Are they fit and proper?

In the words of Ally McCoist himself… I demand to know who these people are…

As usual, full figures are available here – feel free to suggest improvements to the model.