quayside

I think this was the problem. By 2007 the club had borrowed against every asset it had and there was nowhere else to go. Given the precarious financial position at that time I doubt any bank would have lent further funds unless there was security. I still can't work out how Shepherd thought he was going to get out of that mess, he didn't want to sell up like Hall did, so he must have thought he could carry on. Either he had a cunning plan or he was deluded about the financial status of the club. In 2007? Banks were still lending money hand over fist to anyone who could lie on an application form then weren't they? Regardless, what makes you think the club needed significant extra borrowing anyway? In 06-07 IIRC the club had around £10m more going out than coming in, which is around the same amount as was spent on transfers. In the 07-08 season the TV revenues increased and brought in £18m more revenue than in the previous year. In actual fact the total revenue increased by £12m (we weren't in Europe that season). If we'd had another £10m transfer budget, and maintained the same wage level (a number of high earners were removed from the wage bill in Summer 07 - Parker, Dyer, Emre, Luque, Carr, Babayaro, Solano) we'd have broken even or made a profit. The club had a large enough turnover to make it self-sustaining. We could afford to spend more than most other clubs in the league. We didn't need a billionaire to support us. The debt was £70m of which £45m was a fixed long term loan for the stadium expansion which easily paid for it's own interest repayments. That leaves £25m attributable to the running of the club over the previous 15 years. Look at the debt of other clubs from their 07-08 accounts. Only Blackburn and the newly promoted teams had a debt less than £25m. Only 7 had a debt less than £60m, and we had a far bigger turnover than those clubs. We were the 12th/13th richest club in the world, and we couldn't afford the repayments on a £70m loan? Give me a break. The only reason the debt has spiralled in the last couple of years is due to the increase in wages from £62m to £76m, and because of Ashley's pay up front for incoming transfers policy. Neither of which was necessary or inevitable. Did we go bankrupt in 2001 when the debt was £67m and turnover was £55m? No. Unmanageable debt? Financial disaster? Inevitable bankruptcy? Don't make me laugh. OK - I’ll have a go at that point by point. You are confusing personal debt with corporate debt. Banks have never been happy to lend money to businesses unless there was adequate security. By July 2007 every asset and revenue source the club had was in hock and had been used as collateral for loans. And for just about every loan the club had taken out the bank had demanded security. Just for your info at 30th June 2007 the club had the following loans: • £43 million at rates of between 7.36% and 7.65% secured on future ticket sales and corporate hospitality revenues (and not secured on the stadium as is widely believed). These loan notes matured in equal instalments up to 2016. • £13.1 million at 8.55% secured on future sponsorship income repayable half yearly up to July 2010. • £4.5 million at LIBOR + 2.25%.secured on the training ground. • £8 million at 11.72% secured on future broadcasting revenue. • £1.5 million interest free secured as a second charge over the training ground. Why then is a bank suddenly going to lend unsecured money to a business that has the above loans already, has accumulated trading trading losses of £92 million and is technically insolvent? When you factor in the fact that the club was lower mid table and not progressing it makes it even more unattractive. The club was screwed. Your belief that the wage bill could be contained is naïve. The likes of Parker, Dyer, Solano, Luque, and Babayaro (there was also Bramble, Moore and Onyewu) all had to be replaced. And let us not forget that the person who got rid of those players and then set about replacing them with players on higher wages was the chosen manager of the previous board. So it would have all been different under Shepherd and co eh? No negotiations of terms took place with Viduka and Barton until Ashley owned the club? The point about us being the 13th richest club in the world is and always has been complete and utter tripe. The table of richest clubs produced by Deloitte is based purely on income and takes no account whatsoever of costs or net worth. Leeds were 16th on that list in 2004 ffs. If you earn £1 million a year and your costs are £1.5 million a year and you are £1 million in debt you are worth £1 million are you? Like hell you are. No wonder people think we are deluded if we believe that crap. Yes the debt spiraled due partly to the wages increase as a result of the players brought in by Allardyce. But of course that would not have happened if Allardyce had been working under Shepherd and co would it? On the point about payment up front of transfer fees I know this was done in the January window for Nolan. If there is any evidence that it was done for every player bought since Ashley arrived I haven’t seen it. Of course the club didn’t go bankrupt in 2001. At that point the club was still solvent, so why would it go bust?. I have no idea what would have happened if we had continued under the previous board but it is nothing short of blind denial if you think the clubs financial position was fine and easily manageable. Sh1t stinks - it always has done and always will do.

Fulham Accounts for the year to 30 June 2008 Ownership Mafco Holdings Limited, a Bermuda (tax haven) company, which is owned by Mohamed Al Fayed and his family Turnover £53.7m (up from £39.7m last year, a 35.2% increase) Gate and match-day £9.6m TV and broadcasting £34m Commercial activities £4.9m Sponsorship £3.6m Other operating income £1.6m Wage bill £39.3m (up from £35.2m the previous year, an 11.6% increase) Wages as proportion of turnover 73% Profit before tax £3.2m Debts £197m, included £174m owed to Al Fayed Interest payable £1.8m Highest paid director Unnamed: £228,083 State they're in Mohamed Al Fayed continued his extravagant funding of Fulham, increasing the loans from his companies to £174m, the second highest subsidy of any club by an owner behind Chelsea's Roman Abramovich. The loans are all interest free and during the year £9.5m was written off completely. Al Fayed, resident in Monaco, has had the reward this season of Fulham's highest ever finish, and he vehemently insists he has no intention of selling. Following your earlier post I Just had a look at Fulham's accounts at Companies House. Although some of the detail above is incorrect the gist of it is right, in that Fulham owes its existence to a huge loan from Al Fayed. I'll be honest I'm not sure where you are going with this one Parky. If you are saying that Ashley didn't lend the club enough for it to be able to invest properly in ther first team squad and hence survive in the Premiership - then it's hard to argue that point. But that isn't really what you said in the opening post...

Who's been relegated from the PL without debt then? Are you being thick? Don't we owe MA £100m? He's written it off. But, I'd rather still owe the 70m debt the club had 2 years ago and remain in the PL. Comprende? Who says he's written it off?

I think the £40million from Barclays was only ever mentioned in the News of the World, I'm not at all sure it exists.

So there is still debt remaining and we'll not hear anything until it's all completed anyway. Happy days. The writing off of the debt was only ever punted in a newspaper artcle. So if thats the way it is he wants £100 million for the club and lets say another £115 million for his loan. A lot of money for a Championship club that has no manager and is in a state of chaos.

I think this was the problem. By 2007 the club had borrowed against every asset it had and there was nowhere else to go. Given the precarious financial position at that time I doubt any bank would have lent further funds unless there was security. I still can't work out how Shepherd thought he was going to get out of that mess, he didn't want to sell up like Hall did, so he must have thought he could carry on. Either he had a cunning plan or he was deluded about the financial status of the club.

But the £70 million has become more than £100 million and it is still a debt. Have a look at Fulham's debt to turnover ratio. I was responding to your statement that the £70 million of debt has disappeared. When in fact it has increased. I don't know much about Fulham, what their debt is and who it is owed to.

But the £70 million has become more than £100 million and it is still a debt.

Unless we get a new, seriously rich owner we won't be able to afford that list of players. Bearing in mind our new status as a Championship side I would also be surprised if we manage to replace them with better.

"The value of shares can go down as well as up". Caveat emptor! I've no sympathy for the investors in Sports Direct, they should have done their homework. Of course caveat emptor applies whether you are buying shares when a company is first floated or buying Newcastle United. Those Sports Direct investors had done their homework and were relying on a valuation prepared by so called experts, and it was clearly wrong. But my point is very simple - Ashley got lucky with the valuation and exploited it. Edit: How did we get on to this subject on a Shearer contract thread

Having started this discussion on whether Ashley was lucky or not I just want to emphasise that I am not, for one minute, suggesting that his building up of Sports Direct from nothing into a multi million pound business was down to luck. Some may think he was lucky in achieving that but I am not one of them. All I am saying is that when Sports Direct was floated the valuation process was clearly flawed and that resulted in a gross over valuation of the company - and the evidence of this is there for all the world to see. As a result of that valuation he pocketed a much larger sum of money in cash than he should have. That was lucky. Ashley then further expoited the situation by buying back shares at 40p per share when he had previously sold those same shares for £3 per share. Many investors are extremely pissed off with Sports Direct.

Yes. The subsequent performance proves beyond any doubt that the valuation process was flawed and those that carried it out cocked up and Ashley has exploited that - lucky. So identifying and exploiting opportunities to your own benefit is all down to luck? Whatever people think of the bloke for what's happened here, to say that he's become a billionaire due to nothing more than luck is... ...well, delusional really. There are a hell of a lot of lucky people out there, there's not that many billionaires. Of course the fact that he created a business that was worth £x million was not all down to luck. Where he got lucky was turning some of that £x million into cash of about £1 billion when it wasn't worth that. And by moving up into that bracket of wealth he thought he was rich enough and clever enough to own and maintain a Premiership football club - wrong on both counts tbh.

Yes. The subsequent performance proves beyond any doubt that the valuation process was flawed and those that carried it out cocked up and Ashley has exploited that - lucky.

And how has the performance of the business model in practice shown that valuation to be anything other than grossly inflated? Even before the recession kicked in the company's worth had fallen to about 15% of its flotation value. For clarification that's an 85% reduction in value.

Business success involves a hell of a lot of luck. Being in the right place at the right time with the right people around you can make even a complete moron a lot of money. With us, Ashley seemed to be content to rely on his luck rather than good management and his luck just ran out. The situation reminds me a bit of what happened with Alan Sugar a few years ago, when he bought Spurs. He ended up having to sack Terry Venables, who was the fans' favourite, and found himself out of control of his own business. Like Ashley, he was glad to get out in the end. The only criterion for success in a business is making money. With a football club, success is trophies and there's a degree of customer involvement and interest in decisions which would normally be entirely up to an owner. True. Tbh I can understand people thinking that Ashley is deliberately running the club down because his decision making is so catastrophic that it seems inconceivable that he thinks he is doing the right things. But he is a trader and a chancer who got lucky in a market he understands. He thinks that means he has ability to run something else which he doesn't understand and like others before him (Sugar being one as you say) he is very wrong. People like Ashley are used to making decisions in their own time and in their own way, those that work for him know that and set things up around him accordingly. But in a business like a football club decisions are absolutely time critical and success depends upon the assets of the club being moulded into a cohesive unit (and not being viewed as a potential profitable resale). Ashley, though rich, isn't really very clever at all and I have thought since the word go that he was completely out of his depth owning a Premiership club. I'd kind of agree with your conclusion that there's a different skill-set needed to run a football club, when compared with running a business, and that Ashley has fallen short. I don't think it's the time pressure factor that's significant though, and I wouldn't say that Ashley has necessarily been lucky in his business life, any more than Sugar was lucky. In business, they each saw opportunities neglected by other people and went for it hell for leather. The problem with a football club is that it is only partly a business. The other part is a kind of community institution in which the fans have a big influence, and in that respect it's like running a public service. The strain in running a public service is that you have the press, the government and the public on your back, demanding that you run things in a certain way, and you're not your own master. So a lot of what you would like to do has to be weighed up and compromises reached. So you get the worst of both worlds - you have to pick up the tab at the end of the day, but you don't get the free hand that you would get in business. Like you said, maybe Ashley just doesn't have the kind of brain that can anticipate that kind of difficulty and deal with it. He's also used to shunning the limelight, and may not have the kind of thick skin you need in that very public position. I didn't like Shepherd, but he did have the hide of a rhino when the criticism started flying. Strictly in the world of business, appointing Wise and Keegan together might have made a lot of sense. Keegan would produce an entertaining product for the customers and Wise would look after the long-term strategy and the finances. But in practice, that was a disaster. Keegan is more than an employee - he's a public figure with a lot of support and he wasn't averse to using that status to try to get what he wanted, despite what may have been written into his contract. Ashley has not been in control since that point, because he was never going to win a PR battle with Keegan. It's just not a situation that occurs in the business world. Great response bobyule. Just a couple of points of clarification: I don't know so much about Sugar but I think Ashley was lucky. The flotation valuation of Sports Direct was way in excess of reality as subsequent results have shown (pre recession too) and he coined nearly a £billion in cash on the back of that. Also my point about decisions in football being time critical was more to do with planning the timing of decisions so that they are made at the best time for the club, given that there is a clear cut season, transfer window, pre season training etc. The timing and significance of these is known well in advance. And if you do have an unexpected event (e.g KK departure and JFK illness) mid season it becomes a matter of urgency to sort something out quickly. The run of results under Hughton's stewardship post KK where we lost to Hull and Paul Ince's Blackburn at home was a case in point. Your second para on the difference between a football club and other businesses is about as good an analysis as I've ever read tbh. Each of Ashleys shops make around £15-18k a day on a weekend your looking at over £20k a day and a replica shirt release day the shop in that area can make around £10k from the shirt sales alone. That's not luck. He has been able to make loads of money before the shops were floated from hard work hunting for grey market merchandise to flog in this country for dirt cheap then buying out companies to allow him to produce stock for next to noubt and sell it for huge profits. This is not luck. Missed the point. Trousering a £billion of cash when floating a business at £3 a share when it is worth less than half that is luck.

Fair enough but although Shepherd wasn't really rich he was never playing with his own money (unlike Ashley) and in his best years the Premiership was a very different place. The way it is now I think we will fail to compete (if we ever get back there) unless we have bucks to spend. Aston Villa is the most recent example of what you need to do to get back up the table - and they have spent proper money.

If there's any substance to the Profitable Group story - it is high risk attempting an unproven strategy in such a competitive environment. After Ashley's attempts to create the "new Arsenal" do we want the club to be the subject of another experiment? And what if the Asian experiment fails? Ashley needs to move on but I would rather the replacement was someone who was going to build something that at least had its backbone based on established principles. Having said that there may only be one offer and I doubt Ashley will give a toss who he sells to.

I suppose a quick way of looking at it is that on a turnover (income) of £100 million the club is losing maybe £20 million a year in the Premiership. Lets say incoming revenue drops to £60 million in the Championship so Ashley needs to save £40 milion of costs to get back to where he was in the Prem and he needs to save about £60 million of costs to get to break even. You might be able to drop £30 million off the wage bill (if you are lucky) so he would still be well out of pocket. Hmm, still quite a lot then. Cheers. The club is a financial basket case imo and has been for a few years but, as it stands right now, it is onto a whole new level. Just waiting for Ashley to offer a free pair of trainers and a Sports Direct t shirt to anyone who sticks a bid in before midnight tbh. on the other hand £100mill for a club of this size with no creditors and potential (ie get the wage bill down and return to the prem) should attract some business. surely that it what business is about ? You are absolutely right that £100 million, with the Ashley debt written off, is not a bad deal for someone who knows what they are doing, has deep pockets and can take a longish view. But I did use the words "as it stands" and, as it stands, the club can expect income of £60 million next year and that's being optimistic. Costs in cash terms run at about £110 million a year. So far the only things that will reduce the current annual costs are Viduka, Owen and Cacapa walking and some lower paid staff being made redundant - lets say thats savings of £15 million. So, as it stands, the current cost base is about £95 million and no one, right now, is working on doing anything to reduce that further. Therefore, as it stands, the projected loss next year is about £35 million - and that will need funding with cash just to stand still. The more time that passes without someone getting to work on all this the more impossible it will be to do anything about it and the less attractive the prospect of buying the club becomes. And I have seen no evidence from Ashley that he is writing the loan off btw. Caulkin in the Times says he was prepared to (and maybe he has an inside track), but the statement on the club website says it's £100 million to buy the club, and if you buy the club for £100 million you still owe Ashley his money for the loan. At the moment we don't seem to be doing anything to sell the neccesary players. However you can bet the players agents are working hard to get deals sorted. The likes of Martins, Coloccini, Jonas are certain to go no matter how much time the likes of Ashley wastes. That saves us about £24m in wages and will bring in at least £20m in transfer fees. Also did you really expect the statement on the site to mention the money he's owed? At the end of the day nobody will buy the club for £200m, so he will have to right off that £100m. No I really didn't I was just making the point that the only official mention of a price for the club is £100 million and that would leave the debt owing. And the only mention of debt being written off was in the press. And if Ashley hadn't demonstrated his cluelessness so repeatedly I would have total confidence that you are right about him realising that he has to write the debt off or at least discount it. However right now and based on past experience I wouldn't put it past him to reject sensible offers and end up as our owner at the start of next season with the club in complete chaos.

Business success involves a hell of a lot of luck. Being in the right place at the right time with the right people around you can make even a complete moron a lot of money. With us, Ashley seemed to be content to rely on his luck rather than good management and his luck just ran out. The situation reminds me a bit of what happened with Alan Sugar a few years ago, when he bought Spurs. He ended up having to sack Terry Venables, who was the fans' favourite, and found himself out of control of his own business. Like Ashley, he was glad to get out in the end. The only criterion for success in a business is making money. With a football club, success is trophies and there's a degree of customer involvement and interest in decisions which would normally be entirely up to an owner. True. Tbh I can understand people thinking that Ashley is deliberately running the club down because his decision making is so catastrophic that it seems inconceivable that he thinks he is doing the right things. But he is a trader and a chancer who got lucky in a market he understands. He thinks that means he has ability to run something else which he doesn't understand and like others before him (Sugar being one as you say) he is very wrong. People like Ashley are used to making decisions in their own time and in their own way, those that work for him know that and set things up around him accordingly. But in a business like a football club decisions are absolutely time critical and success depends upon the assets of the club being moulded into a cohesive unit (and not being viewed as a potential profitable resale). Ashley, though rich, isn't really very clever at all and I have thought since the word go that he was completely out of his depth owning a Premiership club. I'd kind of agree with your conclusion that there's a different skill-set needed to run a football club, when compared with running a business, and that Ashley has fallen short. I don't think it's the time pressure factor that's significant though, and I wouldn't say that Ashley has necessarily been lucky in his business life, any more than Sugar was lucky. In business, they each saw opportunities neglected by other people and went for it hell for leather. The problem with a football club is that it is only partly a business. The other part is a kind of community institution in which the fans have a big influence, and in that respect it's like running a public service. The strain in running a public service is that you have the press, the government and the public on your back, demanding that you run things in a certain way, and you're not your own master. So a lot of what you would like to do has to be weighed up and compromises reached. So you get the worst of both worlds - you have to pick up the tab at the end of the day, but you don't get the free hand that you would get in business. Like you said, maybe Ashley just doesn't have the kind of brain that can anticipate that kind of difficulty and deal with it. He's also used to shunning the limelight, and may not have the kind of thick skin you need in that very public position. I didn't like Shepherd, but he did have the hide of a rhino when the criticism started flying. Strictly in the world of business, appointing Wise and Keegan together might have made a lot of sense. Keegan would produce an entertaining product for the customers and Wise would look after the long-term strategy and the finances. But in practice, that was a disaster. Keegan is more than an employee - he's a public figure with a lot of support and he wasn't averse to using that status to try to get what he wanted, despite what may have been written into his contract. Ashley has not been in control since that point, because he was never going to win a PR battle with Keegan. It's just not a situation that occurs in the business world. Great response bobyule. Just a couple of points of clarification: I don't know so much about Sugar but I think Ashley was lucky. The flotation valuation of Sports Direct was way in excess of reality as subsequent results have shown (pre recession too) and he coined nearly a £billion in cash on the back of that. Also my point about decisions in football being time critical was more to do with planning the timing of decisions so that they are made at the best time for the club, given that there is a clear cut season, transfer window, pre season training etc. The timing and significance of these is known well in advance. And if you do have an unexpected event (e.g KK departure and JFK illness) mid season it becomes a matter of urgency to sort something out quickly. The run of results under Hughton's stewardship post KK where we lost to Hull and Paul Ince's Blackburn at home was a case in point. Your second para on the difference between a football club and other businesses is about as good an analysis as I've ever read tbh.

Business success involves a hell of a lot of luck. Being in the right place at the right time with the right people around you can make even a complete moron a lot of money. With us, Ashley seemed to be content to rely on his luck rather than good management and his luck just ran out. The situation reminds me a bit of what happened with Alan Sugar a few years ago, when he bought Spurs. He ended up having to sack Terry Venables, who was the fans' favourite, and found himself out of control of his own business. Like Ashley, he was glad to get out in the end. The only criterion for success in a business is making money. With a football club, success is trophies and there's a degree of customer involvement and interest in decisions which would normally be entirely up to an owner. True. Tbh I can understand people thinking that Ashley is deliberately running the club down because his decision making is so catastrophic that it seems inconceivable that he thinks he is doing the right things. But he is a trader and a chancer who got lucky in a market he understands. He thinks that means he has ability to run something else which he doesn't understand and like others before him (Sugar being one as you say) he is very wrong. People like Ashley are used to making decisions in their own time and in their own way, those that work for him know that and set things up around him accordingly. But in a business like a football club decisions are absolutely time critical and success depends upon the assets of the club being moulded into a cohesive unit (and not being viewed as a potential profitable resale). Ashley, though rich, isn't really very clever at all and I have thought since the word go that he was completely out of his depth owning a Premiership club.

But then where does the funding to cover next year's debts and rebuild the team come from? try a fred and talk ashley down to 80mill for a start. FYI we discussed this yesterday see post 1205 link below. The debt hasn't been officially "removed" and since no one is addressing the cost base (mostly player wages) the sums of money needed just to stand still are huge. http://www.newcastle-online.org/nufcforum/index.php/topic,62360.1200.html

They would need to get planning permission to knock the ground down and build flats - I aso think the land the ground is on is owned by the council but am not totally sure on that tbh. Either way if such planning permission was granted it = political suicide.

I suppose a quick way of looking at it is that on a turnover (income) of £100 million the club is losing maybe £20 million a year in the Premiership. Lets say incoming revenue drops to £60 million in the Championship so Ashley needs to save £40 milion of costs to get back to where he was in the Prem and he needs to save about £60 million of costs to get to break even. You might be able to drop £30 million off the wage bill (if you are lucky) so he would still be well out of pocket. Hmm, still quite a lot then. Cheers. The club is a financial basket case imo and has been for a few years but, as it stands right now, it is onto a whole new level. Just waiting for Ashley to offer a free pair of trainers and a Sports Direct t shirt to anyone who sticks a bid in before midnight tbh. on the other hand £100mill for a club of this size with no creditors and potential (ie get the wage bill down and return to the prem) should attract some business. surely that it what business is about ? You are absolutely right that £100 million, with the Ashley debt written off, is not a bad deal for someone who knows what they are doing, has deep pockets and can take a longish view. But I did use the words "as it stands" and, as it stands, the club can expect income of £60 million next year and that's being optimistic. Costs in cash terms run at about £110 million a year. So far the only things that will reduce the current annual costs are Viduka, Owen and Cacapa walking and some lower paid staff being made redundant - lets say thats savings of £15 million. So, as it stands, the current cost base is about £95 million and no one, right now, is working on doing anything to reduce that further. Therefore, as it stands, the projected loss next year is about £35 million - and that will need funding with cash just to stand still. The more time that passes without someone getting to work on all this the more impossible it will be to do anything about it and the less attractive the prospect of buying the club becomes. And I have seen no evidence from Ashley that he is writing the loan off btw. Caulkin in the Times says he was prepared to (and maybe he has an inside track), but the statement on the club website says it's £100 million to buy the club, and if you buy the club for £100 million you still owe Ashley his money for the loan.

I suppose a quick way of looking at it is that on a turnover (income) of £100 million the club is losing maybe £20 million a year in the Premiership. Lets say incoming revenue drops to £60 million in the Championship so Ashley needs to save £40 milion of costs to get back to where he was in the Prem and he needs to save about £60 million of costs to get to break even. You might be able to drop £30 million off the wage bill (if you are lucky) so he would still be well out of pocket. Hmm, still quite a lot then. Cheers. The club is a financial basket case imo and has been for a few years but, as it stands right now, it is onto a whole new level. Just waiting for Ashley to offer a free pair of trainers and a Sports Direct t shirt to anyone who sticks a bid in before midnight tbh.

I suppose a quick way of looking at it is that on a turnover (income) of £100 million the club is losing maybe £20 million a year in the Premiership. Lets say incoming revenue drops to £60 million in the Championship so Ashley needs to save £40 milion of costs to get back to where he was in the Prem and he needs to save about £60 million of costs to get to break even. You might be able to drop £30 million off the wage bill (if you are lucky) so he would still be well out of pocket.