true faith – NEWCASTLE UNITED LATEST ACCOUNTS – AN EXPERT (and Fan’s) ANALYSIS

by • April 12, 2017 • NewsComments (3)1190

NUFC have filed their accounts for last season (15/16) but they’re not yet available for us minions to view. Instead Lee Charnley has released some limited information in a statement, a mere taster so to speak. If you can contain your excitement, the full accounts should be available in the next few days. It’s not what’s in the 15/16 figures that’s key here. It’s what Charnley has said in the statement about the current season’s (16/17) accounts which has raised eyebrows (and anxiety levels) amongst our support.

“The financial impact of relegation is difficult to overstate and this will become evident in our next set of financial results for the year ending June 2017,”

“The biggest impact by far is the dramatic reduction in centrally distributed income that comes with dropping down a division; the reality being our income in this area is forecast to fall by over £30m compared to 2015-16.

“To highlight the differences, our 16 live TV games last season earned us £12m in revenue. Contrast this with 2016/17 EFL live fees which, based on our current number of confirmed appearances (12 away and 6 home), will earn us a total of £720k.

“To illustrate further the cost of relegation, 2016/17 marks year one of the new Premier League TV deal and the team that finishes in 18th place this season is expected to receive in the region of £30m more revenue than we did for the same place finish last year.

“Our approach, following relegation, was to make further sizeable investment in our playing squad in preparation for the EFL Championship season ahead and our annual wage bill is, we believe, still above and beyond many current Premier League teams. Whilst not without financial risks, this strategy was adopted in order to maximise our chances of promotion at the first time of asking.

“Outgoing transfers will ultimately generate a significant net player trading surplus for the summer 2016 transfer window but, due to the cash profile of the deals, this will result in a net cash outlay in 2016-17.

“Our adopted strategy has therefore only been made possible by the cash injection from our owner, who continues to provide interest free funding to support the club’s operations, never more important than during this financially challenging season.”

For those of you expecting a huge transfer splurge in the summer (I heard one caller recently on a radio phone-in demand that NUFC spend £200m in the summer!!), I hope your expectations have been well and truly managed.
Anyway, back to the figures which have been released (for year ending 30 June 16), what are the highlights (or lowlights)

  • Small profit (£4.6m)
  • Whopping increase in net debt (£127.8m)
  • Wages up (by £9.6m). Turnover down (£3.1m).

In summary, poor but not disastrous. As highlighted above, the disastrous will follow next year!!

Let’s start to look at this in more detail.

Profit

A sixth consecutive profitable season. My take on this is simply ‘if only’.

If only we hadn’t appointed such an incompetent as Steve McClaren. If only Rafa Benitez had come a few months earlier. If only we had managed to escape relegation ……..

…….. we would’ve been in a really strong position to push on and start competing at the top half of the Premier. The club was in remarkably good shape to take that next step but relegation has set us back 5 years. More of that cheery message later.

We haven’t got the full details of NUFC’s accounts but the limited release reveals some of the club’s key problems:

  • Whilst the drop in turnover is due to a reduction in our broadcasting income (£4.5m), Ashley was still unable to significantly grow our commercial and match day income even in the top flight. Apologies for keep banging on about this but it’s this failure which has seen clubs like Spurs overtake NUFC and leave us trailing in their wake.
  • Wages increased by nearly £10m to £74.7m. Whilst we haven’t got comparable wages for all other Premier League clubs, it’s likely that our wage bill was in the top ten. The team woefully underperformed.
  • Player amortisation increased to 28.3m. This basically reflects what the club has spent on transfer fees. Since NUFC returned to the Premier League in 2010, their amortisation level has been criminally low. This reflects a chronic under-investment in playing staff since promotion from the Championship.
  • In 2015, Ashley at last released the purse strings. The club signed Georginio Wijnaldum, Aleksandar Mitrovic, Florian Thauvin, Chancel Mbemba, Jonjo Shelvey, Andros Townsend and Henri Saivet. Net spend in 15/16 was a (comparatively) whopping £70.7m. This transfer splurge was reflected in the amortisation increase. The fact that this funding coincided with Newcastle’s relegation was catastrophic. I suspect it won’t be forgotten by Ashley.

 

Net Debt

Net debt ballooned to £127.3m with the bank balance almost cleared out. We now know that Ashley has since loaned the club a further £33m so it’s likely that the net debt has increased to at least £160m since June 2016 (although it’s unclear whether the new loan is repaying one of Ashley’s former loans). I fear that this will have a huge impact on Ashley’s willingness to spend if they do return to the Premier League.

I still believe that Ashley would sell the club but is so stubborn that he would not accept anything less than his full investment in NUFC (Purchase Price £140m + Loans £162m = £302m). Randy Lerner sold Villa for a huge loss enabling their debt to be cleared and a sizeable transfer pot to be made available in the summer (despite a shocking loss of over £80m in 15/16). If only Ashley was prepared to do similar.

So what does this mean for the summer?

Well, not a lot really.

It’s the current year’s accounts in the Championship which will drive what Ashley is prepared to spend in the summer. Charnley has already prepared the ground in the statement highlighted at the start of the article.

Reading between the lines, he’s none too subtly telling us not to expect a huge cash outflow in the summer even if we do win promotion. My belief is Ashley would approach promotion in a similar vein to our last promotion in 2010. History shows that he will look to reduce the net debt, cut costs and make limited funds available for transfers.

It will take a number of years before he will make any significant funds available (probably when we’re threatened with relegation).

Whether Benitez will be happy to stick around to witness this Ashley frugality is another matter.

Andrew Trobe

 

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3 Responses to true faith – NEWCASTLE UNITED LATEST ACCOUNTS – AN EXPERT (and Fan’s) ANALYSIS

  1. oliver simpson says:

    Ashley will only sell the club if he can get a massive payoff of likely at least a billion. Mainly due to if we get back into the premiership. He will see Newcastle as being able to provide him a windfall that’s likely to balance the decreasing return he’s getting from his retail empire.

    As he has and always will see Newcastle as an easy source of revenue where he has to do little and can haul off on his cronies like Lee.

    Or only loan money when he thinks he needs to and ends up covered by selling a player or cutting staff jobs.

    These figures and all of the time Ashley has been at Newcastle prove is that he’s running Newcastle like we are one of his discount stores. Operate by the cheap, buy cheap, develop cheap and maintain cheap to get by the bare minimum.

    He only sees the short term investment return, makes no effort or ambition for our club. No investment in developing youth, expanding our sources of avenue other than free promotion for his main business.

    Has driven away sponsors that will invest in our club. Fans who would buy season tickets and now has to rely on selling cheap to attract the families to make up this difference. Which only will last as long as families can manage to pay.

    As long as Ashley owns our club. We will never truly grow and remain in a static state of zombie cash focused retail playing chain of a club.

    This is what ten years of Ashley owning our club has brought us.

  2. Steve Byers says:

    Top class journalism – I’m glad there is one publication willing to simply put up a mirror to the moron that runs this club.

    What astounds me is the plethora of idiots that will again expect £200m to be spent in the Summer, and then maintain that Ashley is our saviour. I can forgive people being stupid once, maybe twice. But to get duped year on year and then fall victim to factual amnesia on an annual basis just baffles me. I’m trying not think of our fans within the “football fans are fickle’ stereotype. But every year that this happens a little bit more of my soul dies – it’s been a long decade!

  3. Alistair Davies says:

    Every time we go round this under investment and relegation cycle we end up with MORE debt. Only Ashley can change this. If/when Rafa decides he can no longer work under Ashley this summer then ALL we can look forward to is a continuation of the under investment and relegation cycle, and MORE debt. Outlook is gloomy unless Ashley backs Rafa to the hilt.