Newcastle United Finances - 2008 Accounts Recently Filed

[Guest fading star]

quayside, any chance you could come round and fix my garage door? I’d like to see what it looked like the right way up.

[Wallace]

These figures make sense of some of the club's recent actions.

 

However, the mistrust and sceptism is down to the same old thing - lack of communication - with the supporters and with the staff.

 

We have been allowed to believe that "big name" signings were being chased (stories in the summer than Ashley had promised a big name signing to entice box holders to renew).  Whether that was true or not, it raised expectations but now it seems apparent that it was never going to happen.  Even a couple of months ago, JFK was saying he would have money to spend in January - so was he being misled or just making it up.

 

The trouble is that fans then feel let down whereas now they have seen these figures, people are now seeing things in a different light.

 

It also appears to me that in view of this information, they have handled the recruitment (or lack of) players very poorly.  They obviously need to get rid of the big wage earners ASAP and probably realised that they needed to do so last January - yet they are all still here.  And it seems that when they have tried to sell players that they have "forgotten" to tell the players concerned which has created ill-feeling.  Yet they still went out and panic-bought Xisco.

 

Maybe last year was a steep learning curve but unfortunately the damage is done and they cannot risk relegation and the impact that would have on the club.  However, at this point in January, you feel any signings would be an act of desperation as if they had "planned" their January transfer policy, the players would already have arrived.

 

 

[indi]

These figures make sense of some of the club's recent actions.

 

However, the mistrust and sceptism is down to the same old thing - lack of communication - with the supporters and with the staff.

 

We have been allowed to believe that "big name" signings were being chased (stories in the summer than Ashley had promised a big name signing to entice box holders to renew). Whether that was true or not, it raised expectations but now it seems apparent that it was never going to happen. Even a couple of months ago, JFK was saying he would have money to spend in January - so was he being misled or just making it up.

 

The trouble is that fans then feel let down whereas now they have seen these figures, people are now seeing things in a different light.

 

It also appears to me that in view of this information, they have handled the recruitment (or lack of) players very poorly. They obviously need to get rid of the big wage earners ASAP and probably realised that they needed to do so last January - yet they are all still here. And it seems that when they have tried to sell players that they have "forgotten" to tell the players concerned which has created ill-feeling. Yet they still went out and panic-bought Xisco.

 

Maybe last year was a steep learning curve but unfortunately the damage is done and they cannot risk relegation and the impact that would have on the club. However, at this point in January, you feel any signings would be an act of desperation as if they had "planned" their January transfer policy, the players would already have arrived.

 

 

 

The summer was both pre Credit-Crunch and pre Keegan-Flounce, things have changed dramatically since then, both in terms of Ashley's ability to chuck money away on NUFC and possibly his desire to do so, also.

[fredbob]

These figures make sense of some of the club's recent actions.

 

However, the mistrust and sceptism is down to the same old thing - lack of communication - with the supporters and with the staff.

 

We have been allowed to believe that "big name" signings were being chased (stories in the summer than Ashley had promised a big name signing to entice box holders to renew).  Whether that was true or not, it raised expectations but now it seems apparent that it was never going to happen.  Even a couple of months ago, JFK was saying he would have money to spend in January - so was he being misled or just making it up.

 

The trouble is that fans then feel let down whereas now they have seen these figures, people are now seeing things in a different light.

 

It also appears to me that in view of this information, they have handled the recruitment (or lack of) players very poorly.  They obviously need to get rid of the big wage earners ASAP and probably realised that they needed to do so last January - yet they are all still here.  And it seems that when they have tried to sell players that they have "forgotten" to tell the players concerned which has created ill-feeling.  Yet they still went out and panic-bought Xisco.

 

Maybe last year was a steep learning curve but unfortunately the damage is done and they cannot risk relegation and the impact that would have on the club.  However, at this point in January, you feel any signings would be an act of desperation as if they had "planned" their January transfer policy, the players would already have arrived.

 

 

 

The big name thing was cringe worthy to be honest, I believe that the big name signing was Colocinni, i think the way Ashley "announced" it was a clue as to how he viewed the transfer.

 

I also disagre with the "They would have arrived by now" bit. The way i see it is that we'll be scouting similar calibre of player to Spurs and with those in the frame not many clubs would be willing to sell so early, leave it a bit longer and they put themselves in a win win situaiton, either they keep the player and progress with the season or the buying clubs get desperate and pay over the odds.

 

People go on about how its the clubs fault for not planning ahead when the exact same thing happens over and over again, but in actual fact its the fans "fault" for not relaising that in actual fact its the nature of the window, this is just how it goes.

[TRon]

Excellent stuff Quayside - you (and the other accountants - Chez, Colos, LLLO) are doing a great job in breaking this down so people can actually take in what Ashley has done for the club.

 

As far as I'm concerned, there may not be a Newcastle United without Ashley's cash, it certainly wouldn't be in the same guise as we know it today. You're welcome to hold your grudge against Ashley for as long as you want, but the facts point that his model was appropriate all along and those grumbling about him trying to take money out of the club (!!) are simply not grasping the severity of the situation and the turmoil of the credit markets since the summer of 2007 (funnily enough, just after Ashley took over).

 

   I agree with most of the stuff you are saying I think people it is time to be United once again we have to back Ashley and his long term strategy. He bought back Keegan in a ways by thinking he would be great for us. HE WAS GREAT to some time but for what ever reason it didn't work out why are we so harsh on a person who spends 230 mil on us? It is really insane we think we are against Ashley but indirectly we are against Newcastle United. We have to stop this tit for tat know and move on. Time to be positive for Ashley

 

Whatever anyone may think about Ashley there is no doubt that work has gone in securing young players for the future. But none of us will know if this strategy has worked for a while yet. And in the mean time you look at the state of our first team squad and the fact that we have a management structure that is shall we say "unappealing" to a proven manager and you simply think wtf (well I do).

 

Arsenal have built from the bottom but they have always made sure that their first team squad is competitive. This area is being neglected and you really can't discount the potential for it all to go seriously wrong.

 

Arsenal were heading the same way we are under Bruce Rioch before they hired Wenger. Since then they have generally operated a policy of selling their best players at a premium price once they have gone past their sell by date, replacing them with younger, better models. This is something I still endorse.

[EthiGeordie]

      I think ever since we start arguing with Ashley we harm our team greatly. If we are smart enogh we have to appreciate Ashley now and be united to all the people in the world. Then we can have demonstration and everything in the summer or when we are safe from the relgation treat. Lets not be rational when we see things.

[Matt]

Thanks quayside and Offshore. So is it right to say that a player, bought for £10 million, will potentially constitute £20 million worth of loss on the profit and loss accounts over a period of time? £10 million being lost when the player is paid for (whether that is all in one go or over a period); £10 million being lost through his depreciation as an asset? And I presume of the two scenarios I outline, it is the latter - the depreciation of the asset - which is amortisation?

 

Thanks again for the help.

 

No, you're double counting there. Depreciation is just a way of matching what you paid for something to what useful life you get out of the asset.

 

So we sign Owen for £16m in 2005- out goes £16m in cash but we only record a cost of £4m when we first acquire him. Next year £4m until the end of his contract= £16m over the four years.  Otherwise you would be making an excessive loss in year one and an excessive profit in the last three- depreciation simply spreads the cost fairly- just don't confuse cost with physical flow of cash.

 

 

[Matt]

quayside, any chance of breaking the figures down to annual cost and revenue excluding debt and amortisation? Would like to see the underlying strength of the business.

 

Before amortisation, impairment and exceptional items (though how we can count sacking a manager as exceptional these days....)-

 

Turnover- £98.8m

Op costs- £100.8m

 

So £2m down from the very off!

 

 

We're not generating enough money and too much is going out on wages. The underlying business is extremely fragile. There's nothing to say we'll definitely get a sign off in July- only Ashley's desire to protect his intiial investment can keep us a going concern.

[Karjala]

Century Radio news reported that turnover is a touch under £100m, with wages being at £62m.

[Mowen]

Simon Bird's written an article saying we owe Ashley £238m. Fucking shameful.

[Guest]

Has NE5 said anything on this subject yet?

[themanupstairs]

Has NE5 said anything on this subject yet?

 

Nope. But we're all on full alert.

 

Quite interested in his input tbf

[midds]

Simon Bird's written an article saying we owe Ashley £238m. Fucking shameful.

 

Tuesday's press conference should be interesting...

[Guest sittingontheball]

Just a quick question for you accounting types.

 

I assume football shares have a sentimental premium on them compared to ordinary companies listed on the exchange, but even accepting that, based on what we know now about the club's financial position, was the club's stock price too high? Why did it take due diligence to find things out? Were there major liabilities off balance sheet? Why didn't the price discovery mechanism work in reflecting the club's state in the stock price?

 

If wheelerer-dealerer was seen as the only way forward, you can understand why Ashley the club first approached Bent 'Arry to replace Allardyce.  I'm no fanboy and don't like him as a human being, but he did an admirable job getting good players in for  little money at Portsmouth. With hindsight, if him flying up to do the job was the stumbling block, perhaps they should have let him. Especially if Owen does it anyway.

[Mowen]

Harry spent a lot of money at Portsmouth (although most has now been recouped with the sale of their three best players). Muntari, Nugent, Utaka, Benjani, Defoe, Crouch, Diarra, Johnson and Diop cost a fair old wedge between then, James, Campbell and Distin are on monster contracts. Why do you think Pompey are struggling financially now?

 

edit: and that's £30m at Spurs already.

[ikri]

Harry spent a lot of money at Portsmouth (although most has now been recouped with the sale of their three best players). Muntari, Nugent, Utaka, Benjani, Defoe, Crouch, Diarra, Johnson and Diop cost a fair old wedge between then, James, Campbell and Distin are on monster contracts. Why do you think Pompey are struggling financially now?

 

edit: and that's £30m at Spurs already.

 

I'm pretty sure it was mentioned that their wage bill was something like 90% of their turnover last season.  Even with UEFA cup football this season & the sales of a couple of players all they've really done is pay off some of their debts, they need to either massively increase their turnover or ditch half their squad to reach some kind of equilibrium.

 

They've been wanting to build a new stadium for a while now, but with little or no space in Portsmouth available to do so & very few investors around these days willing to lend them £250m they've not really got any chance of that happening any time soon.

 

Pompey's owner can't easily reach into his own pockets to fund the club since a lot of questions get asked about where the money is coming from, the father of the Pompey's owner gave an interview not too long ago where he said that it was he, not his son, that actually owned Pompey.  If that were true, the "fit and proper person" test that the FA use on club owners might actually have to be applied since Arcadi Gaydamak (Alexandre Gaydamak's father) is an international fugitive, wanted on two charges for illegal arms dealing and tax evasion.

[AyeDubbleYoo]

Simon Bird's written an article saying we owe Ashley £238m. Fucking shameful.

 

Tuesday's press conference should be interesting...

 

"Which one of you is Simon Bird?"...

 

Think we know the rest!

[themanupstairs]

Simon Bird's written an article saying we owe Ashley £238m. f***ing shameful.

 

Tuesday's press conference should be interesting...

 

"Which one of you is Simon Bird?"

 

"Me"

 

"Alright Dezza, hand me the lube. Simon, bend over you c*** "

 

Think we know the rest!

 

FYP

[gray]

Harry spent a lot of money at Portsmouth (although most has now been recouped with the sale of their three best players). Muntari, Nugent, Utaka, Benjani, Defoe, Crouch, Diarra, Johnson and Diop cost a fair old wedge between then, James, Campbell and Distin are on monster contracts. Why do you think Pompey are struggling financially now?

 

edit: and that's £30m at Spurs already.

 

They've been wanting to build a new stadium for a while now, but with little or no space in Portsmouth available to do so & very few investors around these days willing to lend them £250m they've not really got any chance of that happening any time soon.

 

 

they were planning to build a floating stadium at one point

[LoveItIfWeBeatU]

http://www.journallive.co.uk/north-east-news/todays-news/2009/01/23/nufc-accounts-reveal-state-of-the-club-61634-22760509/

 

NUFC accounts reveal state of the club

 

Jan 23 2009 by Adam Jupp, The Journal

 

THE state of Newcastle United’s finances since Mike Ashley’s takeover are revealed for the first time in the club’s latest accounts.

 

They show the sports retail tycoon has kept the Magpies afloat with a £100m loan, which would have to be paid back to him by any future new owner.

 

The Journal understands Ashley is not charging any interest on the loan and has also recently pumped £10m of his own money into the clubs’ coffers to help with running costs.

 

But it has also emerged United’s wage bill, including players, directors and other staff, has shot up by nearly £5m to just under £70m.

 

That swallows-up around 70% of the company’s annual revenue, a situation football finance experts last night voiced concerns over.

 

And, had it not been for the £6.5m the club received in compensation for striker Michael Owen’s World Cup knee injury, the balance sheet would have looked even worse last year.

 

Richard Slack, principal lecturer in accounting and finance at Newcastle Business School, Northumbria University, said: “Newcastle is continuing as a going concern and that is largely based on a £100m loan that has been paid in by Mike Ashley, on which no interest is being charged.

 

“That would be payable on demand if the control of the club was to change. So, any would-be buyer, as well as paying the asking price for the club, would have to secure a re-financing deal to ensure the on-going commercial viability of Newcastle United.

 

“And looking at the accounts, you are talking about £100m being needed, or more. The reason I say ‘or more’ is that the wage costs is 70% of total revenue, which is high.

 

“This is in the context of being out of the FA Cup in the third round, out of the League Cup in the early rounds, no European football on the horizon, season-ticket sales probably down and, of course, looking to the future, they are not immune from relegation, which would of course severely impact on their top line.

 

“So, they are very reliant on that £100m.”

 

Ashley bought the Magpies from the Shepherd and Hall families in the summer of 2007, raising supporters hopes of a Roman Abramovich-style revolution at St James’s Park.

 

But his relationship with fans deteriorated after the departure of Kevin Keegan and Ashley launched an ill-fated attempt to sell the club to a host of potential suitors from around the globe.

 

Now, just weeks after he took United off the market, he has pledged to continue to bank-rolling operations for the foreseeable future.

 

Indeed, accounts for the period up to June 2008 have only been signed off on the basis Ashley will continue to offer financial support, in the form of loans and cash-injections.

 

A note to the accounts, prepared by Ernst & Young and signed by managing director Derek Llambias reveals Ashley’s fresh £10m investment and states: “This funding, together with newly-agreed bank facilities has been incorporated into the directors’ cash flow forecast for the group.

 

“These forecasts indicate that the group can continue to meet its debts as they fall due for a period of at least 12 months from the date of approval of these financial statements. The directors have also received a commitment from its parent undertaking, St James Holdings Ltd, and from the ultimate controlling party Mr MJW Ashley that they will continue to provide the group with financial support so that it can meet its debts as they fall due for a period of at least 12 months from the date of approval of these financial statements or up until the date of any changing control.

 

“On this basis, the directors have prepared the financial statements on a going-concern basis.”

 

A separate set of accounts for St James Holdings Ltd – the firm set up to handle Ashley’s takeover – confirm the total amount he has personally spent on the Magpies is £238m, taking into account what he paid to the Halls and Shepherds for their shares. The accounts tell of the payouts given to both Glenn Roeder and Sam Allardyce when they left the club. It states: “On May 7 2007, Glenn Roeder resigned as team manager, and subsequent to this, on May 15 2007, the appointment of Sam Allardyce as his replacement was announced.

 

“Costs relating to this change and subsequent changes to backroom staff totaling £1,280,000 were recognised in the financial statements for the prior year. In January 2008, further changes to the team management and backroom staff were announced. Costs relating to this reorganisation, totaling £4,597,000, have been recognised in the current year.”

 

The accounts state average league attendances at St James’s Park rose from 50,686 to 51,321. It costs £101.6m to run the club, compared to £87.1m the year before.

 

Touching on wages, the director’s report reads: “Although the total cost increased to £70m, our turnover to wage ratio, which remains a key performance indicator for the Group, fell to 70.4%. The 2007 ratio was 75.2%.”

 

The change reflects the fact media income rose from £26m to £41m.

 

United’s debt – displayed as net current liabilities – is £22.6m and the club last year made a loss of £20.3m, compared to £34.2m.

 

Fees of £1.34m were paid to London law firm Freshfields Bruckhaus Deringer for the services of former chairman Chris Mort between June 12 2007- June 11 2008.

 

Dr Slack said while the club may struggle to find a buyer, its long-term future is not at serious risk. He said: “The only way you can make money out of football is to be in Europe and Newcastle are not going to be in Europe in the near future If the club was to go down, clearly that is not good news but is it a Leeds United scenario? I don’t think so.”

 

Key points

 

Ashley's £100m loan to United

 

Billionaire's £10m cash-injection

 

Wage bill rises to £70m

 

Mort cost club £1.4m

 

Owen's £6.5m injury compensation

 

Allardyce's £4.6m pay-off

 

Magpies make £20.3m loss

 

United £22.6m in debt

 

The wage bill should be getting smaller at the end of the season when Owen, Viduka, Cacapa, Gonzalez and quite possibly Harper, Butt, Edgar all leave.

[Disco]

http://www.guardian.co.uk/football/2009/jan/22/mike-ashley-newcastle-finances - link to the Guardian report on it.

[Colos Short and Curlies]

Just a quick question for you accounting types.

 

I assume football shares have a sentimental premium on them compared to ordinary companies listed on the exchange, but even accepting that, based on what we know now about the club's financial position, was the club's stock price too high? Why did it take due diligence to find things out? Were there major liabilities off balance sheet? Why didn't the price discovery mechanism work in reflecting the club's state in the stock price?

 

If wheelerer-dealerer was seen as the only way forward, you can understand why Ashley the club first approached Bent 'Arry to replace Allardyce.  I'm no fanboy and don't like him as a human being, but he did an admirable job getting good players in for  little money at Portsmouth. With hindsight, if him flying up to do the job was the stumbling block, perhaps they should have let him. Especially if Owen does it anyway.

 

The stock market price reflected the value of the company to the current owners (i.e. Halls and Shepherd). With hindsight it was overvalued as the proce did not factor in the fact that a large proportion of the company debt had a change of ownership clause forcing repayment within months rather than years. Had Ashley known this he could have argued that (a) the price was too high or (b) he should pay for the shares in installments rather than all at once.

 

Every company has items which on the face if it look OK, but if you dig deeper could cause problems down the line. Its up to the auditors to decide on (a) the likelyhood of the problems and (b) their impact on the current standing of the company.

 

When the last Hall/Shepherd accounts were signed (a) was pretty remote due to the revenue generated by the company and no trigger to change the payment structure of the debt. So before anyone jumps in, the accounts were not wrong at any time.

[Baggio]

MORE details of the Toon’s financial state are today revealed.

 

As revealed in later editions of last night’s Chronicle, fresh accounts show the Magpies are being kept afloat by a £100m loan from owner Mike Ashley.

 

We told how United suffered a loss last year of more than £20m, have a wage bill of around £70m and are in £22m of debt.

 

But the accounts, signed off by Ashley and managing director Derek Llambias, also make a string of revelations about the club’s previous regime, under the Shepherd and Hall families.

 

They show more than £80,000 a year was being paid to former chairman Freddy Shepherd’s son Kenneth in “consultancy fees”, while nearly £350,000 was paid to a company linked to brother Bruce for warehouses.

 

The papers compare Ashley’s first year at the helm with the previous 12 months and state: “Triple Sports Consultancy Limited (Triple S) is a company of which Kenneth Shepherd (son of WF Shepherd) is a director and shareholder.

 

“Amounts payable to Triple S relating to consultancy services were £nil (2007: £81,883).”

 

They add: “BS Shepherd was a director of the company in the prior year, up to his resignation from the board on June 26, 2007. SMP (Services) Limited (SMP) is a company of which BS Shepherd is a director and in which he has an interest.

 

“Amounts payable to SMP during the prior year relating to warehousing facilities and residential properties rented by the Group were £343,458.”

 

Ashley paid the Shepherd and Hall families £138m to take control of United.

 

Since then, he has ploughed cash into the club in the form of a recent £10m cash injection and the bumper loan. The Toon accounts state: “A loan of £100m from Mr MJW Ashley is unsecured.”

 

“Other loans comprise bank loans totaling £6,067,000, which are secured on future sponsorship monies.”

 

The papers state the club’s previous loans were paid off in full by Ashley in September 2007.

 

There are 118 people employed as “playing staff and management,” compared to 97 the year before and the wage bill is now around £70m, rising by £5m from the year before.

 

Michael Teasdale, of the Newcastle United Supporters Club, said: “All we want if for the owners to communicate with us. If they came to us and said money is tight, I think the vast majority of fans would get behind team and support the club.”

 

Richard Slack, principal lecturer in accounting and finance at Newcastle Business School, said: “Ashley has bought the club and put £100m in. If the club was to go down, clearly that is not good news but is it a Leeds United scenario? I don’t think so.”

 

 

http://www.chroniclelive.co.uk/nufc/newcastle-united-news/2009/01/23/how-ashley-cash-keeps-newcastle-united-afloat-72703-22761888/

[Dave]

Michael Teasdale, of the Newcastle United Supporters Club, said: “All we want if for the owners to communicate with us. If they came to us and said money is tight, I think the vast majority of fans would get behind team and support the club.”

 

[OzzieMandias]

But he basically explained the situation ages ago and no fucker believed him.