The Review in Full. From Reuters.

Rangers International Football Club plc

(“RIFC”, “Rangers”, “the Company” or “the Club”)

Business Review and Strategic Plan Update

The Board of Rangers International Football Club plc (“the Board”) announces the completion of a comprehensive business review of Club operations as announced at the Annual General Meeting (“AGM”) on 19 December 2013 (the “Review”).

This release summarises the findings of the Review and outlines the Board’s future strategy to rebuild and reposition the Club at the top of Scottish Football and to allow Rangers to compete in Europe.

Executive Overview

The new Board was ratified four months ago at the AGM in December 2013, with a strong mandate to develop, support and enhance the performance on the pitch and also to ensure Rangers becomes financially strong and secure.

At the time of the AGM, the Board believed that there was sufficient cash in the business to fund the Club through the current season.  However, the Review found that Rangers was in a more severe financial condition.

The Review process discovered issues in operating procedures, commercial contracts and strategy, all of which were more serious than anticipated.

The Club’s financial position was precarious as it had mismanaged almost all of its cash reserves following administration.  The cash position today requires careful monitoring but will improve with the sale of season tickets, improved commercial relationships, the planned injection of further capital and cost management initiatives identified by the Review.

The Club raised £70.7 million through ticket sales, commercial revenues and share issue proceeds between May 2012 and December 2013, and spent this relatively quickly, and in some areas liberally, with only £3.5 million of this cash remaining at 31 December 2013.

The Board considers that the perfect opportunity to rebuild Rangers immediately post administration in a progressive, stable manner with a solid financial base has been completely missed through a series of
ill-defined, short term focused decisions with little advance recognition of medium or longer term requirements.

The Review has identified operational and organisational changes that need to be made. Business practices have already been tightened and a rigorous examination of total spend has addressed the outflow of cash.  Annualised savings in operating costs of £2 million have already been achieved with more savings identified and in progress. These savings have not reduced the available budget for the playing squad.

The Board has developed and approved a strategic plan to re-build and re-establish the Club, to return it to the top of the domestic game within three seasons, and to thereafter be competitive in UEFA competition.  This will require continued investment in the playing squad over the next three years and beyond to drive on-field success.

In financial terms, the business is now on track to meeting a key objective of being financially robust and the directors of RIFC (“the Directors”) intend for the strategic plan to drive the business to become sustainable by Season 2015/16, a significant improvement from the operating loss of £14.3m reported for the 13 months to 30 June 2013.

In order to achieve the strategy identified below, the Company will need to raise capital.  The Board has determined that over the next three years it expects to raise between £20 million and £30 million to be invested in the Club.  The Board will consider the most appropriate source of finance which may be available to the Club including equity and other sources in order to obtain the necessary funding whilst also seeking to ensure the Club’s financial stability is protected.

The Directors consider that the issue of equity is important and likely to be an appropriate method of achieving a strong balance sheet.  The Board acknowledges the importance of supporters as shareholders as well as its institutional investors.

At the current time the Company is not in a position to carry out a significant equity fundraising as the required shareholder authority that was requested at the AGM to enable the Board to allot shares on a non pre-emptive basis was not granted.

Although this authority is routine for AIM traded companies, it was understandable at the time that it was not granted given the position of the business and the lack of apparent strategic direction.  It doeshowever mean that the Company is currently prevented from issuing small amounts of equity to third parties and new shareholders.

The authority given to the Board at the AGM in December 2013 to enable the Company to allot up to 43,400,000 new ordinary shares of 1p each in the capital of the Company on a pre-emptive basis to existing shareholders has not been exercised to date.  In the event that season ticket sales over the forthcoming weeks are materially less than anticipated then the Company may seek to use this
pre-emptive authority which can offer a cost effective and efficient method of raising capital.

To implement the initial phase of the three year plan set out below, the Board intends to seek shareholder approval in Autumn 2014 for the issue of additional equity pursuant to Section 551 of the Companies Act 2006.

Continued negative external comment and campaigns have created significant operating difficulties and have been threatening the Club’s orderly and progressive recovery.

A current example of the difficulty being faced by the Club, and which will regrettably impact upon supporters, is that for next season supporters will now be unable to pay for their season tickets by credit or debit card.  The Club’s merchant acquirer, which processes credit and debit card transactions, has advised that it would require extensive security, including standard security to be granted over Ibrox Stadium and an insurance policy at considerable cost to the Club, to protect itself against any potential liability arising from passing on monies from season ticket purchases ahead of next season’s matches.

The Board believes that one of the major factors influencing the merchant acquirer to change its terms was the extensive negative coverage of calls in some quarters for supporters to refrain or delay purchasing season tickets.

As previously stated, the Board has no intention of granting security over Ibrox and therefore has regrettably decided that for the current season ticket renewal process it will proceed with direct payment only to the Club by way of bank transfer, cash or cheque payment.  Any supporters who are on the automatic renewal scheme will not have their tickets renewed automatically and will also require to renew their seats individually.

The Club recognises that this will inconvenience a significant number of supporters, however in the Board’s opinion, the demands placed upon the Club by the merchant acquirer are not in the best interests of Rangers.

To assist supporters at this time, the Club is extending the season ticket renewal window until
16 May 2014, to give every supporter sufficient time to renew their season ticket.  Additional information is being sent to every season ticket holder today to explain in detail the required process changes.

Should the Club suffer a substantial decrease in season ticket income in the next two months, then it would be unable to trade in the short term without seeking additional external funding as previously disclosed in the RIFC December 2013 interim results.

A successful and sustainable future for the Club can be achieved if the Club continues to be managed professionally, with strong stewardship and standards of governance and has the continued support of the Rangers fans, shareholders and commercial partners.

Business Review – Assessment of Current Operations

Following the Review it is the Board’s opinion that many previous decisions were ill thought out, unstructured and in some cases poorly executed.  This approach permeated most operating areas of the Club.  The following points give an indication of issues identified:

§  The Club raised £70.7 million through ticket sales, commercial revenues and share sales proceeds between May 2012 and December 2013 and proceeded to spend most of this relatively quickly with only £3.5 million of this cash remaining at 31 December 2013.  An analysis of this spend is attached as Appendix 1.

§  £2 million was invested in capital purchases that were non essential and have not generated incremental income.  In particular the purchase of Stadium Wi-Fi, LED displays and Jumbo Screens used cash that could have been retained to sustain current operations.  A further £2.6 million was spent purchasing Albion Car Park and Edmiston House.

§  The financial forecast in place when the current Board was appointed contained several key assumptions that upon review were seriously flawed, e.g. assuming that £2m of capital expenditure which was funded in cash could be refinanced at a later stage in the year, the presumed availability of a £2 million overdraft facility, and the amount and timing of advance profit distributions from Rangers Retail.

§  Poor planning and forecasting of cash flows resulted in the Club utilising most of its cash reserves and the Club needing to secure short term credit facilities.

§  The Club has entered into a number of contracts that are onerous and not delivering value on price or service.  In several instances it appears that the Club did not use lawyers to protect its interests.  Work is in progress to terminate or re-negotiate these as appropriate.

§  The absence of any effective cash and business planning processes, and budget accountability led to a culture where there was limited responsibility and ownership for financial management.

§  Match ticket prices which were reduced by 33% for Season 2012/13, were kept unchanged for Season 2013/14 with a resultant loss of more than £1.5m of potential income.

§  The Club acquired a number of players in Summer 2013 that, based on financial forecasts, it should have known that it could not afford.

§  The first team squad has the second highest wage bill in Scottish football for a team currently playing in the third tier.  The total player wage cost is well in excess of the level it should be primarily due to generous and poorly structured contracts that were awarded to some players when they joined the Club.

§  The ability to influence the composition and cost of the squad in the short term is limited due to existing contract periods and terms.  Only a small number of current first team player contracts end in Summer 2014 and the team will require strengthening for the Championship next season.

§  There is no proper talent identification and scouting operation in place for professional players and at the time when investment in playing talent needed to focus on identifying value acquisitions, the Club dismantled its scouting and recruitment network.

§  Key football support areas such as Medical, Sports Science and Performance Analysis are
under-resourced and not equipped to the level required.

Future Strategy

The Board is committed to building and developing a successful, sustainable Rangers Football Club.  Its focus is to restore Rangers to the top flight of Scottish football and to being competitive in UEFA competition.

A Strategic Plan has been developed which is based upon delivery in the following five key areas to rebuild and refocus the Club in a measured and progressive manner:

1.       Developing Football Performance and Capability

2.       Focus on Player Asset Management and Youth Development

3.       Re-connecting effectively to our Local and Global Fan Base

4.       Developing Best in Class Commercial and Operational Capability

5.       Strengthening Commitment to our Communities

1.      Developing Football Performance and Capability

The Board has set the following performance targets for re-establishing the Club in the SPFL Premiership:

Season 2014/15 – Building a team and organisation to deliver the SPFL Championship in the first season in the division

Season 2015/16 – Re-establishing the Club in the SPFL Premiership with a top two finish and the ability to challenge for the title

Season 2016/17 – Target to be SPFL Premiership Champions and establishing the platform to be competitive in UEFA competition

In financial terms, participation in UEFA competition via Europa League or Champions League, provides access to a prize fund that is a multiple of that available in the domestic game.  Premiership league placing and domestic Cup success provides access to these competitions, via a series of qualifying rounds.

Rangers need to be playing in UEFA competition every season in order to obtain access to this substantial prize fund.

To deliver our strategic ambition, the following specific actions will be implemented:

§  Strengthen the Playing Squad – Funds will be made available on a targeted and phased basis over future transfer windows, starting in Summer 2014, in preparation for the Championship Season but also looking at future seasons with a more structured and planned approach.

§  Strengthen the Club’s Football Operations – With the creation of the new position of Chief Football Operations Officer, with specific responsibility for developing best in class football operations support.  This new role will support the Football Manager and the Board and will concentrate initially on developing player talent identification, scouting and recruitment capability.

§  Create Football Partnerships – Work with leading clubs outside Scotland to access developing talent, and football operations expertise.

2.      Focus on Player Asset Management and Youth Development

§  Invest in Academy Players – An Academy Development Fund will be created with dedicated annual investment, increasing over time, committed to the acquisition and development of high calibre young players at different stages of their careers with the target to increase the number of Club trained talent coming through to play in the first team at an early stage.

§  Develop Player Asset Management – Developing playing talent is one of the major challenges at any football club.  The Chief Football Operations Officer will also have the remit to develop the Club’s player asset strategy which will build a long term structure and plan to deliver playing talent for the Club and maximize value from player trading.

3.      Re-connecting effectively to our Local and Global Fan Base

§  Launch the Rangers Membership Scheme – Providing a consistent and better connected approach to the Club for local and global supporters, with a targeted range of benefits responsive to the input from the fan base.  All season ticket holders will automatically be members.

§  Creation of the Fan Liaison Board – One of the clear messages from the “Ready to Listen” survey was the desire for a new approach to fan engagement with the Club.  The Fan Liaison Board will be constituted from Club Members with a broad range of supporters represented and this board will be the primary conduit for direct engagement.

§  Improving the Match Day Experience – A rolling investment programme to improve the match day experience and refresh Ibrox Stadium to return it to a best-in-class venue will be implemented.

4.      Developing Best-in-Class Commercial and Operational Capability

§  Restructuring the Organisation – A revised organisation and staffing structure for the Club’s non football operations is being implemented to ensure support for delivery of best-in-class operational performance.  This includes assessing outsourcing opportunities to drive cost effectiveness and service delivery.

§  Improved Commercial Focus – A new commercial organisation will be created under the leadership of a new Chief Commercial Officer.  This group will be tasked with maximizing revenues from existing products and services and expanding the Club’s commercial partnership offering on a national and international scale.

5.      Strengthening Commitment to our Communities

§  Creating Opportunities through football – Through the positive promotion of sport, education and physical activity, the brand of Rangers Football Club has been a powerful force for good across many communities.  The Rangers Foundation has a strong track record of success that can be enhanced for wider benefit to positively improve lives in the communities in which we operate.

The recent past has been a challenging time for Rangers and there is much to be done to restore this great institution back to the top of Scottish football and to once again be competing in Europe.

With the continued support of all Rangers fans we can deliver on the strategy and once again give the Rangers fans a Club capable of delivering top flight success.

For further information please contact:

Appendix 1 – Summary of Income & Expenditure 29 May 2012 – 31 December 2013

END