It appears that at least part of David Murray’s plan to get rid of all Rangers’ debts includes something innovative to do with the retail business – The Rangers Shop Ltd. Within the overall Rangers business, the shops are a shining beacon. Ever since the manufacturing operation came in-house, selling jerseys has been very lucrative. The cost of RFC buying the jerseys fell – the cost to the punters did not and as a result of this and the continued opening of new stores, we have a growing profitable business.
Profits after taxes were £3.6m in the year to June 2003, more than double the previous year. It paid a £3m cash dividend to its shareholders. Companies House records show that David Murray owns 1 share (or 1%) in The Rangers Shop Ltd which would seem to entitle him to £30,000 for his trouble. In addition over £250,000 was paid to other Murray companies for running the mail order operation – but that’s another, and continuing story.
What’s it worth?
First of all it’s probably worth taking a stab at valuing this company. An average retail company currently trades on 15 times earnings which would make Rangers Shops worth over £50m. This average would, however, include the likes of Marks & Spencer and Laura Ashley which are not really like Rangers, and a more appropriate comparator might be JJB Sports which currently trades on 10 times earnings valuing Rangers Shops at more like £35m.
Which is the right valuation? If average retail companies trade on 15x, then some trade at higher valuations than this. I could argue that a niche retail company, which is opening more shops, and which has an extremely loyal customer base, should trade on a premium multiple rather than a discount like JJB. I would therefore say that £50m is a fair ball park estimate.
How do we get cash out?
So sell it off and the debt disappears! Except so too would the profits and the cash, leaving a hole in the Rangers accounts. This would be like selling the Golden Goose. And how loyal would the customer base be if this happened? Selling a 49% stake in it would still leave control with the club, but investors pay less if they don’t exercise full control. Messing around with the most successful part of a business is dangerous. I’d need convincing that any plans for selling off even part of the Rangers Shops are good idea for Rangers FC.
BROCK STOKER