The Ibrox chairman reckons everyone got carried away with the Scottish Cup semi-final win last season when Warburton’s men won on penalties.
But he believes that given the summer spending spree, Rangers should be in a much better position in the Premiership and not in a battle with Aberdeen and Hearts for second place.
King confirmed that funds will be available in January and hinted that some players may leave.
King, who addressed share-holders at the club’s annual general meeting yesterday, also confirmed that Rangers remain hamstrung by the commercial arrangements with Sports Direct, agreed by previous regimes, but remains confident he can break all ties to increase revenue.
King said: “I think we are further behind Celtic than I would have expected at this stage.
“Celtic have the bigger budget and are able to bring in better quality players but I expected us to be more competitive.
“Maybe that was the artificial euphoria of the semi-final last season. Maybe we thought we were closer than we are and that gap does exist and it is more apparent this season.
“So it just shows what we have to do to be truly competitive with Celtic.
“Securing European football is critical. If you look at the gap, we will always be the number two club, if that was our ambition, because our resources are way beyond Aberdeen and Hearts.
“Our ambition is to be the top club but you cannot do that without being in Europe, not only from a team competition point of view but also the revenue streams.
“The budget you have available if you are playing in Europe is completely different than if you are only playing in domestic competitions.
“Despite some disappointments this season I think the team is well positioned to achieve second position, which was always the realistic target.
“This time next year I would like us to be in Europe so I think it’s important we finish the season strongly.
“We will only truly be recognisable as Rangers when we are back competing in Europe.
“There will be funds in January. Mark has been working with the football board on January targets. Some names have come up and there are quite a number of options he’s looking at.”
King feels Warburton was well supported during the summer with 11 new players coming in and that Rangers should be well ahead of Aberdeen and Hearts at this stage and he has encouraged the manager to conduct his January business shrewdly.
He told RangersTV: “I think Mark will admit that his summer spending has not been as successful as the previous season.
“Joey Barton, for example, tied up a lot of wages but he didn’t perform for the manager so he has got to recycle that. He has to keep working
on the squad by deciding which ones he might want to move on and which ones he might want to bring in so I
do expect some activity in January.
“I think enough investment was made in the summer but if you look at the level of investment then Joey Barton, for different reasons, didn’t make much of a contribution and Niko Kranjcar got injured.
“So some of the players that Mark brought in to give that balance of youth and experience haven’t worked out for various reasons.
“I don’t think we are in the position we should be, but in a certain sense I think we are. I would prefer us to be a stronger second rather than still fighting for second but we are about where we should be.”
In a very convivial agm at Glasgow’s Clyde Auditorium, shareholders were urged to pass a resolution allowing the board to sell shares
without offering them to existing shareholders,
therefore bringing in more revenue and diluting Mike Ashley’s stake.
King also confirmed that he remains resolute in his determination to free Rangers from the constraints of the Sports Direct contracts.
He said: “Of course, our plans would be enhanced, indeed advanced greatly, if we were not still being hampered and stifled by Sports Direct, who continue working to an agenda designed to help only themselves.
“Nevertheless, it remains my belief that we can free ourselves from these multiple onerous contracts and once again be able to operate and benefit from a strong retail arm.
“The last year has seen a continuation of Mike Ashley and Sports Direct’s attempts to bully your company’s directors by suing them in their personal capacity.
“The present board comprises supporters who signed up for this challenge and who are not intimidated in the slightest by such bullies.”