NUFC - A leveraged buyout?

[Cronky]

People seem to be getting very hung up on the word 'debt'. The Glazers borrowed money from financial institutions to buy Man U, with the aim of funding that debt with the profits that they were going to make from the club. Ashley paid cash for NUFC and its existing stadium debt, but registered the purchase as a debt owed by the club to a company also owned by him.

 

It's an accounting trick, made I think for tax purposes. It's possible that he thought he was on safe ground with this purchase because the club would increase in value, but I can't see that he would have thought it possible - then or now - to reduce his debt by making a profit out of the running of the club on a yearly basis. Man U are virtually the only football club that runs at a profit.

 

The really important distinction is that whereas the Glazers have to rake off a profit in order to service the debt, Ashley doesn't because effectively he owes money to himself and doesn't charge any interest or have a deadline to clear the debt completely.

 

People also seem worried that if a buyer comes along, they'll have to repay the debt to Ashley. Well of course if the purchase price is such that they don't fancy doing that, then they won't buy. What I can imagine happening is what happened at Liverpool - where the buyers simply buy the club for the amount of debt, with either no charge or a small charge for the club itself. We've all heard of debt-ridden clubs or businesses being bought for a £1.

 

Having said that, I don't think Ashley wants to go down that route. I can't imagine that he enjoys owning the club, but he doesn't want to walk away as a failure.

[bealios]

In answer to the question to what happens to the loan if Ashley sells, nobody knows for sure, but a good indicator is that when the club was for sale in 2009 for £100m, the deal was to be structured so that the buyer would purchase the loan for £100m, and the shares for £1.

 

In laymans terms, after paying Ashley £100m the club would owe Ashley nothing, and he would have written off £140m (approximately).

 

[Matt]

People seem to be getting very hung up on the word 'debt'. The Glazers borrowed money from financial institutions to buy Man U, with the aim of funding that debt with the profits that they were going to make from the club. Ashley paid cash for NUFC and its existing stadium debt, but registered the purchase as a debt owed by the club to a company also owned by him.

 

It's an accounting trick, made I think for tax purposes. It's possible that he thought he was on safe ground with this purchase because the club would increase in value, but I can't see that he would have thought it possible - then or now - to reduce his debt by making a profit out of the running of the club on a yearly basis. Man U are virtually the only football club that runs at a profit.

 

The really important distinction is that whereas the Glazers have to rake off a profit in order to service the debt, Ashley doesn't because effectively he owes money to himself and doesn't charge any interest or have a deadline to clear the debt completely.

 

People also seem worried that if a buyer comes along, they'll have to repay the debt to Ashley. Well of course if the purchase price is such that they don't fancy doing that, then they won't buy. What I can imagine happening is what happened at Liverpool - where the buyers simply buy the club for the amount of debt, with either no charge or a small charge for the club itself. We've all heard of debt-ridden clubs or businesses being bought for a £1.

 

Having said that, I don't think Ashley wants to go down that route. I can't imagine that he enjoys owning the club, but he doesn't want to walk away as a failure.

 

Exactly- this whole discussion can be massively simplified by just ignoring the shareholder loans entirely and consider them as if they were share capital in the business. That's exactly what anyone valuing or buying the business would do.

[Guest bimpy474]

Tbh i still dont see this as a leveraged buyout a la Man United...we're not paying interest on a loan to a bank...Mike Ashley floated Sports Direct for alot more than he bought us for so he bought us outright, unless ive missed something it seems legit...

 

It is not. Why do people still discuss this? Mike Ashley bought the club with his own money, then he paid the clubs debts of with his own money, this as a interest free loan which he wants to get back over time. The only way he will get his money back is by selling the club for a very high price or running the club with profit for a number of years.

 

Spot on.

[Revolution Number 9]

I thought I read somewhere that part of their aim was to have us running self sufficiently at a £10m profit each season in a few years?

[BlueStar]

I thought I read somewhere that part of their aim was to have us running self sufficiently at a £10m profit each season in a few years?

 

On Ashley's New Year Resolution list, along with getting down to 13 stone.

[themanupstairs]

Tbh i still dont see this as a leveraged buyout a la Man United...we're not paying interest on a loan to a bank...Mike Ashley floated Sports Direct for alot more than he bought us for so he bought us outright, unless ive missed something it seems legit...

 

It is not. Why do people still discuss this? Mike Ashley bought the club with his own money, then he paid the clubs debts of with his own money, this as a interest free loan which he wants to get back over time. The only way he will get his money back is by selling the club for a very high price or running the club with profit for a number of years.

 

This is technically the best we could have hoped for, barring a ridiculous Man City-esque buyout where debt just doesnt exist...this does mean we may suffer more Carroll-esque problems where we become a selling club but the problem isnt the selling, its the not replacing...the board think we are demanding they spend £35mil, we demand they just replace players going out with quality...

 

but yeah i think there is some knee-jerk to some figures in this thread tbh...

 

Agreed. Selling a star center forward for 35M is all well and good, but at least use your supposedly top class scouting network to take a punt on unearthing gems, and show us that this model COULD work, if the club worked hard enough behind the scenes. Earlier in the summer it really looked like it was working, up until they flopped big time failing to secure the mobile forward we desperately need to make our "new tactics" work.

[Revolution Number 9]

I thought I read somewhere that part of their aim was to have us running self sufficiently at a £10m profit each season in a few years?

 

On Ashley's New Year Resolution list, along with getting down to 13 stone.

Think it was on that 'our aim is to finish 10th or above every season' thing. Not sure though, might just be talking out of my arse.

[Guest Rainforest]

What winds me up the most is just how little would actually be required to appease the fans.

Noone in here ( Well ok a few granted) have a problem with selling a player when we are offered that much money for him, as long as you bring in SOMEONE in his place.

Take your pick of talented striker talents for 5 mill Euro in europe, hell - buy two of them. Still leaves you with a 25 million pound profit, and the fans would have had SOMETHING to hang their coats on.

Selling and not replacing with ANYONE is an insult, let alone disappointing.

[themanupstairs]

What winds me up the most is just how little would actually be required to appease the fans.

Noone in here ( Well ok a few granted) have a problem with selling a player when we are offered that much money for him, as long as you bring in SOMEONE in his place.

Take your pick of talented striker talents for 5 mill Euro in europe, hell - buy two of them. Still leaves you with a 25 million pound profit, and the fans would have had SOMETHING to hang their coats on.

Selling and not replacing with ANYONE is an insult, let alone disappointing.

 

Looks like we agree on something

 

Obviously can't replace Carroll with just ANYONE per se. Can't say I'd have been happy with Clinton Morrison as his replacement, but yeah, as you say, it wouldn't have taken much for them to get the fans off their back. Fans will be eternally optimistic about their club's fortunes, it's the reason we support football clubs that don't win everything year in year out. But then again, it's also the reason they take us for mugs. Just the way it works I suppose.

[quayside]

Quayside, if the debt held in the holding company is not owed by the club itself then why is it being paid down? The £138m figure owed to MA by SJH Ltd in 2008 reduces to £132m in 2009. How and why?

 

I really hadn''t thought that there had been any reduction in any of the sums owed to Ashley in the published info. But I'll have a look at the accounts tomorrow and get back with an answer.

 

I've had a look at the accounts and although, during the years concerned, there are fluctuations in the balance on Ashley's loan, the overall trend is upwards year on year. In 2010 St James Holdings ceased to be the ultimate parent company as Ashley has set up a company called MASH Holdings and that has all his business interests in it, including his shares in Sports Direct. 

 

Anyway I think we can now forget any notion that Ashley borrowed the money to buy the club.

[bealios]

I thought I read somewhere that part of their aim was to have us running self sufficiently at a £10m profit each season in a few years?

 

On Ashley's New Year Resolution list, along with getting down to 13 stone.

Think it was on that 'our aim is to finish 10th or above every season' thing. Not sure though, might just be talking out of my arse.

 

If you think about it the perfect football financial model would be to maintain Premier League status (and not risk relegation) so that you keep the massive TV income, and do it by filling your club with young cheap low wage players with sell on value (and keep the player profit).

 

The UEFA slots are not worth it, since the change in income isn't that great, and you further risk stretching the squad and need a bigger squad to compete in the larger number of games. Champions League places are out of reach realistically, without spending insane amounts, and even then the existence of Chelsea/Man Utd and Man City means that there is always a risk of spending insane amounts and still finishing 5th.

 

So the sweet spot is probably between 12th and 7th - no higher or lower, and to hit the sweet spot by buying cheap players with potential sell on value, having a sensible wage cap.

 

Seems depressingly identical to the model Ashley is running.

[ChezGiven]

Quayside, if the debt held in the holding company is not owed by the club itself then why is it being paid down? The £138m figure owed to MA by SJH Ltd in 2008 reduces to £132m in 2009. How and why?

 

I really hadn''t thought that there had been any reduction in any of the sums owed to Ashley in the published info. But I'll have a look at the accounts tomorrow and get back with an answer.

 

I've had a look at the accounts and although, during the years concerned, there are fluctuations in the balance on Ashley's loan, the overall trend is upwards year on year. In 2010 St James Holdings ceased to be the ultimate parent company as Ashley has set up a company called MASH Holdings and that has all his business interests in it, including his shares in Sports Direct. 

 

Anyway I think we can now forget any notion that Ashley borrowed the money to buy the club.

I never said that was the case, I was asking why the debt held by SJH Ltd had been reduced by £6m and whether that £6m came from the club's income. If it did, it would mean Ashely was paying himself back out of the club's finances rather than using all available income to drive the club forward.

 

 

[madras]

Then It's not a leveraged buyout, especially as it could only be seen as repaying the loan as opposed to the actual purchase.

[UV]

But for all of Ashley's faults, he's not far away from being the best kind of owner that we can realistically hope for. I know everyone will point to Arsenal, Liverpool and Spurs as clubs that invest in new players and are striving for Champions League football, but if you take a closer look at the way those clubs are run, you'll see that they're not so much different than the way we're being run.

 

Spurs spend quite a lot money, but their revenue is also higher. However, now that they're not in the CL, you see the reports coming out that Harry has to sell before he buys, and that's why they practically gave away Jenas and Hutton for free: to reduce the wage bill. They posted an 18m profit for the last six months of 2010, but 22m of their revenue came from CL or things related to the CL. They won't be able to post such nice figures this year, which is why Harry hasn't much to spend. I think Spurs have one more shot at it financially. They might hesitate to give that shot to Redknapp, but they've probably got one more 30m bullet left, and then it'll be time to reload by selling Modric for 40m or something like that. Otherwise they won't be able to support the existing structure at the club. So they might seem like a club that's being run very well - indeed they are - but they're not sitting on a mountain of cash that's available to spend. They, too, are now restricted because of their failure to qualify for the CL.

 

Take a look at Liverpool and you see a similar picture. Although they've spent big this summer, they have pretty much shot their load. Their wage bill will be through the roof and their revenue will not be able to sustain this kind of spending for long, unless they qualify for the CL in the next year or two. I've read a few interviews by John Henry and he's already mentioned how surprised he is at the way the finances work for football. He's a smart owner so he realizes that the top four is about to become a closed group, so the time to break in is now. I think we're all aware that the top 3 - Chelsea, Man Utd and City - are fixtures in the top four. Which leaves only one spot. And that's why Liverpool have gone for it now. If they fail, it won't be long before you see similar rhetoric from John Henry: 'wage bill too high', 'must reduce size of squad'. They'll face the same problems that every other club outside the CL faces. It's just a matter of time if they fail to qualify for the CL.

 

There's no need to go on about Arsenal. Everyone knows the way they work. They post profits almost every year without fail, but they're only able to do so because they qualify for the CL year in year out. Their wages are ridiculously high - comparable to Man Utd's, I think - but they make a profit almost every transfer window. Even though they spent 40m yesterday, they still made a large profit this window.

 

There are only five or six clubs in Europe that can consistently lose money: Chelsea, City, Malaga and maybe Roma. The rest have to survive by generating revenue. Which is why, realistically, having a different owner won't matter much in the long run. The best we can hope for is probably a Randy Lerner type, but how many owners are funding their clubs year-in year-out?

 

Now back to the way we're run. We now have a very low cost structure. Our wage bill is probably very small. I think it'll be around 50% of our revenue, a ratio which only Man Utd can compete with (!). Our revenue continues to grow because the TV pot is getting progressively bigger, and our commercial income will grow when the contracts are up for renewal since we're once again an established Premiership club. We're on course to make a profit this year, after making about 50m last year including the Carroll money (just a guess, but I probably won't be far off). So we will be able to invest and bear the costs related to it. I don't know whether we'll have to wait until Ashley sells up or not, but we're in a position to invest sustainably because our costs are low. We'll probably make 25m minus whatever we spend in January. So the financial footing of the club is now very strong, whoever the owner is. We're probably one of the best clubs you could buy right now because there is room to grow. I don't really have a major point to make, except that for all of Ashley's faults, he's good with the finances and in the long run, with a more ambitious owner, we'll be able to compete without stretching ourselves and risking everything, something which a lot of clubs would have to do to compete with the top 4.

 

The TV money may be increasing (as it is for all our competitors), but all other revenue streams are either decreasing year on year, or not increasing at the same rate as other clubs. Ticket sales, merchandising, advertising are all down, and soon we will not be as big a draw on the TV either. The recession may have a hand in some of this downturn, but I very much doubt it is the significant driver, which is the way the club is being run by Ashley which is nothing like the clubs you mentioned above. People can go on about the folly of taking £25m up front for 5 years of advertising as opposed to a maximum of £2.5m/year for 4 years, but there isn't a businessman in the world who would not say the former is a far, far better deal for the club. I'd have hoped it was obvious, but it apparently needs to be spelled out, that continually cutting costs to match a constantly reducing revenue is not the sign of a business on the up.

 

To use your shooting analogy, we found a silver bullet which we could have used but we sold it, and instead of using the money to buy a round of normal bullets we paid off some of the loan on the gun and left it empty. That's a shit analogy, but the point is we're absolutely not being run like those clubs (or how we used to be run when we were competing with or better than them). They are trying to succeed by pushing the boat out. It will not always work, and you may have to spend a few years recovering and building up momentum for another push, but now we aren't even trying. You can choose to believe we are currently restricted by paying off debts (to the owner), or are saving up for a big push, or need to stock up on pre-paid wages if you like, but absolutely nothing in the 4 years of Ashley's ownership gives any indication of a desire to advance this club on the pitch beyond an ambition to stay in the league on minimum expenditure. There's also nothing but blind hope that this is a strategy designed to help in the sale of the club. From day one the plan was to run the club as it is being done now, to bring in players with potential - not to develop them and keep them and build a team for the long term - but with the aim of selling them on for a profit. Keep the club in the Premiership and the running costs are covered, and as a bonus you have a prime global marketing tool for free.

 

We readily accept that at the meeting, Messrs Ashley, Mort and Jimenez told Mr Keegan about Mr Ashley's plans and vision for the Club, in particular his plan to find and bring in younger players some of whom might later be sold on at a profit

 

The evidence of this lack of footballing ambition MUST now be absolutely clear surely. We got lucky with a once in a generation prodigy from the academy, that should have been our impetus to make progression. We could either have kept him and built a team around that talent (and a local focal point to the team like Shearer was is great for selling shirts and bringing in advertising, etc), or used the money from his sale to significantly improve the first team or strengthen the squad. We did neither and replaced proven effective players in our team for players with "potential" who are new to the team, culture and league. A risky strategy at best.

 

We certainly haven't strengthened the squad as we have only replaced for the most part first team players, so the only way we can possibly have improved is if we have improved the first team. There is no way anyone can say the first team we have now is better than it was at the start of September last year for at least 3 or 4 months until we've seen how the new players fit in, but IMO it's very unlikely as it can only be stronger if ALL the new players match or better the players they replaced, and that is highly unlikely to happen no matter what their brief appearances for us so far and their track records tell you. Anyone with any realistic perspective knows that not all new players fit in and live up to expectations, in fact it's unusual that more than half do even if they are already adapted to the league/country, so the chances are that we will be weaker as a 1st team let alone as a squad.

 

 

Let's clear this point up too, there's a lot of people in this thread saying or implying we are still making losses. Well no-one who has seriously looked at the figures and has a basic understanding of them thinks we made an operating loss last year. Frankly if we didn't make a profit with the wage bill as it was (and still is), then it's an absolute disgrace, and I don't see how anyone could say with a straight face that Ashley was running the club well financially if that was the case. However I'm pretty confident that that isn't the case and that the revenues haven't dropped to the point that we'd make a loss on a £50-60m wage bill (although they would quite easily be far better if the club was actually being run well). With the ins and outs as they stand the wage bill won't have changed significantly from last year, so if we don't spend any money on transfers we'll make a profit this year too (unless of course revenues drop through supporter disaffection as much as they did in 08-09).

[bealios]

From day one the plan was to run the club as it is being done now, to bring in players with potential - not to develop them and keep them and build a team for the long term - but with the aim of selling them on for a profit. Keep the club in the Premiership and the running costs are covered, and as a bonus you have a prime global marketing tool for free.

 

 

Have to say completely disagree with this. People don't buy football clubs to make money, surely all of the evidence shows that, how many profitable clubs are there around?

 

I can't imagine for one second that Ashley was prepared to spend £130m because he thought it would be good marketing for Sports Direct, and there was a slim chance he could defy the odds and make a profit. Too much risk, too little possible reward, does not fit with his (anyone else's business decision making).

 

He bought it on a whim without much thought, he liked football, hence when an opportunity comes along to own one of the most famous football clubs, he jumped at the chance. After all, £130m was only a small part of this fortune as it was back then. And he would have a spare £100m to invest in the team - or so he thought.

 

Things are different now of course, and I genuinely believe he is trying to run the club as efficiently (cheaply) as possible whilst retaining Premier League status to help with a sale (and avoid any further cash injections from himself).

[Guest Rainforest]

I thought I read somewhere that part of their aim was to have us running self sufficiently at a £10m profit each season in a few years?

 

On Ashley's New Year Resolution list, along with getting down to 13 stone.

Think it was on that 'our aim is to finish 10th or above every season' thing. Not sure though, might just be talking out of my arse.

 

If you think about it the perfect football financial model would be to maintain Premier League status (and not risk relegation) so that you keep the massive TV income, and do it by filling your club with young cheap low wage players with sell on value (and keep the player profit).

 

The UEFA slots are not worth it, since the change in income isn't that great, and you further risk stretching the squad and need a bigger squad to compete in the larger number of games. Champions League places are out of reach realistically, without spending insane amounts, and even then the existence of Chelsea/Man Utd and Man City means that there is always a risk of spending insane amounts and still finishing 5th.

 

So the sweet spot is probably between 12th and 7th - no higher or lower, and to hit the sweet spot by buying cheap players with potential sell on value, having a sensible wage cap.

 

Seems depressingly identical to the model Ashley is running.

 

 

:clap:

 

The only thing I disagree with are the 7-12th spot arguement. I genuinely believe coming 10th or 16th is of no importance whatsoever

[bealios]

Aiming for 16th is a bit dangerous though, little margin for error!

[Colos Short and Curlies]

But for all of Ashley's faults, he's not far away from being the best kind of owner that we can realistically hope for. I know everyone will point to Arsenal, Liverpool and Spurs as clubs that invest in new players and are striving for Champions League football, but if you take a closer look at the way those clubs are run, you'll see that they're not so much different than the way we're being run.

 

Spurs spend quite a lot money, but their revenue is also higher. However, now that they're not in the CL, you see the reports coming out that Harry has to sell before he buys, and that's why they practically gave away Jenas and Hutton for free: to reduce the wage bill. They posted an 18m profit for the last six months of 2010, but 22m of their revenue came from CL or things related to the CL. They won't be able to post such nice figures this year, which is why Harry hasn't much to spend. I think Spurs have one more shot at it financially. They might hesitate to give that shot to Redknapp, but they've probably got one more 30m bullet left, and then it'll be time to reload by selling Modric for 40m or something like that. Otherwise they won't be able to support the existing structure at the club. So they might seem like a club that's being run very well - indeed they are - but they're not sitting on a mountain of cash that's available to spend. They, too, are now restricted because of their failure to qualify for the CL.

 

Take a look at Liverpool and you see a similar picture. Although they've spent big this summer, they have pretty much shot their load. Their wage bill will be through the roof and their revenue will not be able to sustain this kind of spending for long, unless they qualify for the CL in the next year or two. I've read a few interviews by John Henry and he's already mentioned how surprised he is at the way the finances work for football. He's a smart owner so he realizes that the top four is about to become a closed group, so the time to break in is now. I think we're all aware that the top 3 - Chelsea, Man Utd and City - are fixtures in the top four. Which leaves only one spot. And that's why Liverpool have gone for it now. If they fail, it won't be long before you see similar rhetoric from John Henry: 'wage bill too high', 'must reduce size of squad'. They'll face the same problems that every other club outside the CL faces. It's just a matter of time if they fail to qualify for the CL.

 

There's no need to go on about Arsenal. Everyone knows the way they work. They post profits almost every year without fail, but they're only able to do so because they qualify for the CL year in year out. Their wages are ridiculously high - comparable to Man Utd's, I think - but they make a profit almost every transfer window. Even though they spent 40m yesterday, they still made a large profit this window.

 

There are only five or six clubs in Europe that can consistently lose money: Chelsea, City, Malaga and maybe Roma. The rest have to survive by generating revenue. Which is why, realistically, having a different owner won't matter much in the long run. The best we can hope for is probably a Randy Lerner type, but how many owners are funding their clubs year-in year-out?

 

Now back to the way we're run. We now have a very low cost structure. Our wage bill is probably very small. I think it'll be around 50% of our revenue, a ratio which only Man Utd can compete with (!). Our revenue continues to grow because the TV pot is getting progressively bigger, and our commercial income will grow when the contracts are up for renewal since we're once again an established Premiership club. We're on course to make a profit this year, after making about 50m last year including the Carroll money (just a guess, but I probably won't be far off). So we will be able to invest and bear the costs related to it. I don't know whether we'll have to wait until Ashley sells up or not, but we're in a position to invest sustainably because our costs are low. We'll probably make 25m minus whatever we spend in January. So the financial footing of the club is now very strong, whoever the owner is. We're probably one of the best clubs you could buy right now because there is room to grow. I don't really have a major point to make, except that for all of Ashley's faults, he's good with the finances and in the long run, with a more ambitious owner, we'll be able to compete without stretching ourselves and risking everything, something which a lot of clubs would have to do to compete with the top 4.

 

The TV money may be increasing (as it is for all our competitors), but all other revenue streams are either decreasing year on year, or not increasing at the same rate as other clubs. Ticket sales, merchandising, advertising are all down, and soon we will not be as big a draw on the TV either. The recession may have a hand in some of this downturn, but I very much doubt it is the significant driver, which is the way the club is being run by Ashley which is nothing like the clubs you mentioned above. People can go on about the folly of taking £25m up front for 5 years of advertising as opposed to a maximum of £2.5m/year for 4 years, but there isn't a businessman in the world who would not say the former is a far, far better deal for the club. I'd have hoped it was obvious, but it apparently needs to be spelled out, that continually cutting costs to match a constantly reducing revenue is not the sign of a business on the up.

 

To use your shooting analogy, we found a silver bullet which we could have used but we sold it, and instead of using the money to buy a round of normal bullets we paid off some of the loan on the gun and left it empty. That's a shit analogy, but the point is we're absolutely not being run like those clubs (or how we used to be run when we were competing with or better than them). They are trying to succeed by pushing the boat out. It will not always work, and you may have to spend a few years recovering and building up momentum for another push, but now we aren't even trying. You can choose to believe we are currently restricted by paying off debts (to the owner), or are saving up for a big push, or need to stock up on pre-paid wages if you like, but absolutely nothing in the 4 years of Ashley's ownership gives any indication of a desire to advance this club on the pitch beyond an ambition to stay in the league on minimum expenditure. There's also nothing but blind hope that this is a strategy designed to help in the sale of the club. From day one the plan was to run the club as it is being done now, to bring in players with potential - not to develop them and keep them and build a team for the long term - but with the aim of selling them on for a profit. Keep the club in the Premiership and the running costs are covered, and as a bonus you have a prime global marketing tool for free.

 

We readily accept that at the meeting, Messrs Ashley, Mort and Jimenez told Mr Keegan about Mr Ashley's plans and vision for the Club, in particular his plan to find and bring in younger players some of whom might later be sold on at a profit

 

The evidence of this lack of footballing ambition MUST now be absolutely clear surely. We got lucky with a once in a generation prodigy from the academy, that should have been our impetus to make progression. We could either have kept him and built a team around that talent (and a local focal point to the team like Shearer was is great for selling shirts and bringing in advertising, etc), or used the money from his sale to significantly improve the first team or strengthen the squad. We did neither and replaced proven effective players in our team for players with "potential" who are new to the team, culture and league. A risky strategy at best.

 

We certainly haven't strengthened the squad as we have only replaced for the most part first team players, so the only way we can possibly have improved is if we have improved the first team. There is no way anyone can say the first team we have now is better than it was at the start of September last year for at least 3 or 4 months until we've seen how the new players fit in, but IMO it's very unlikely as it can only be stronger if ALL the new players match or better the players they replaced, and that is highly unlikely to happen no matter what their brief appearances for us so far and their track records tell you. Anyone with any realistic perspective knows that not all new players fit in and live up to expectations, in fact it's unusual that more than half do even if they are already adapted to the league/country, so the chances are that we will be weaker as a 1st team let alone as a squad.

 

 

Let's clear this point up too, there's a lot of people in this thread saying or implying we are still making losses. Well no-one who has seriously looked at the figures and has a basic understanding of them thinks we made an operating loss last year. Frankly if we didn't make a profit with the wage bill as it was (and still is), then it's an absolute disgrace, and I don't see how anyone could say with a straight face that Ashley was running the club well financially if that was the case. However I'm pretty confident that that isn't the case and that the revenues haven't dropped to the point that we'd make a loss on a £50-60m wage bill (although they would quite easily be far better if the club was actually being run well). With the ins and outs as they stand the wage bill won't have changed significantly from last year, so if we don't spend any money on transfers we'll make a profit this year too (unless of course revenues drop through supporter disaffection as much as they did in 08-09).

 

But even if we do post a profit this year (operational or in total) we still have a number of recent years losses (paper and cash flow) that we need to plug. The Caroll sale will strengthen the balance sheet no doubt, but there will still be a few legacy holes to finish filling in for a year or two yet.

[Guest PhilB]

Posted by Pip

Take a look at Liverpool and you see a similar picture. Although they've spent big this summer, they have pretty much shot their load. Their wage bill will be through the roof and their revenue will not be able to sustain this kind of spending for long, unless they qualify for the CL in the next year or two. I've read a few interviews by John Henry and he's already mentioned how surprised he is at the way the finances work for football. He's a smart owner so he realizes that the top four is about to become a closed group, so the time to break in is now. I think we're all aware that the top 3 - Chelsea, Man Utd and City - are fixtures in the top four. Which leaves only one spot. And that's why Liverpool have gone for it now. If they fail, it won't be long before you see similar rhetoric from John Henry: 'wage bill too high', 'must reduce size of squad'. They'll face the same problems that every other club outside the CL faces. It's just a matter of time if they fail to qualify for the CL.

 

You're wrong in your statement about Liverpool, they have reduced their wage bill and squad..

 

This from The Telegraph

 

Liverpool manager Kenny Dalglish completes a summer of bloodletting at Anfield with a leaner meaner squad

 

At the last, Liverpool's bloodletting was complete. This has been a summer of revolution at Anfield, a great leap forward of unprecedented proportions. 

 

Kenny Dalglish and Damien Comolli, at the behest of the club's owners, have ushered 19 players out of Liverpool's doors. The final two, Raul Meireles and Philipp Degen, departed with just minutes of the transfer window to spare. The past is finished. Let the future begin. Fourteen players have been sold or released, and a further five dismissed temporarily, on loan, most notably Joe Cole and Alberto Aquilani.

 

An astounding £30 million has been wiped from the wage chitty, and a little over £20 million raised in funds. The phrase "trimming of the squad" does not quite fit; this has been all-out attack on the errors of the past. Only Brad Jones and Danny Wilson remain of Roy Hodgson's signings, and only three of the 14 signed by Rafael Benítez in his final two years at the club. Less than a year after the putsch which brought Fenway Sports Group to Anfield, Liverpool have undergone a second Night of the Long Knives. This one, though, has lasted all summer.

 

Some were rather more willing than others to stand aside. Paul Konchesky accepted a wage cut to join Leicester. Nabil El Zhar, Emiliano Insua, Milan Jovanovic and, eventually, Degen agreed to cancel their contracts, albeit for lucrative settlements.

 

Liverpool will continue to pay for the mistakes that have gone before. Lille insist Liverpool will continue to supply 60 per cent of Cole's £80,000-a-week wages, meaning Anfield's finances will be drained to the tune of £2.5 million for a season in which the 29 year-old plays in France.

 

Christian Poulsen’s move to Evian has been subsidised, too, but that is rather the point: FSG see their glass as half-full, not half-empty. At least the £2.5 million paid to Cole while he is in France is a saving of £1.65 million. That is the ruthlessness that has pervaded Liverpool’s summer.

 

FSG were determined to build a more cost-effective squad, and were prepared to withstand the short-term financial cost to do so. Hence their decision to spend big and spend early, regardless of the knock-on effects later in the summer.

 

"The owners were happy to take risks and happy for us to spend money," reflected Comolli. "A lot of owners would have said the squad is too big, so you need to reduce, and then when you have done that, bring some players in, but that was never the approach. I told them we would need to buy first and they were very, very brave to accept that."

Nowhere was that cut-throat approach better witnessed than with Meireles. The Portuguese was not desperate to leave Anfield, but was left with no choice after seeing Jordan Henderson and Charlie Adam recruited in midfield and a promise to augment his £35,000-a-week wage, should his first season be a success, broken.

 

Discussions over a pay rise never started. In the end, he had to hand in a transfer request and forego a loyalty payment to smooth his escape to Chelsea. Few Liverpool fans would have sold Meireles, particularly not to a bitter foe and especially not for £12 million, roughly what Hodgson paid for the Portugal international last summer. That is the measure of the new Liverpool, though. Those who are not required will be cast aside. Dalglish wants only those soldiers he deems necessary; a bloated squadron is a cumbersome one.

"For me, the players they have signed have largely been British, which takes me back to when I started watching Liverpool," said Craig Bellamy, the final piece of incoming business carried out by Dalglish. "It looks so familiar to me, so to be part of it is such a huge honour."

 

Dalglish has built the squad he wanted: young, energetic, mostly home-grown, and with a passion for the club – but it fits FSG's vision, too. The squad is streamlined – 22 senior players, supported by youth – with this summer's six signings, Bellamy apart, earning a combined, and relatively modest, £13 million-a-season in wages. That is a saving of £17 million-a-season. FSG are no asset-strippers, though. They have spent £114 million on players in eight months, plus wages, with £75 million regained in transfer fees. This is not a rerun of Liverpool's recent past. This is the start of the future.

[Guest Rainforest]

Id eat my own shit for a month straight to have owners like that

[colinmk]

Liverpool are thinking football that's for sure. Interestingly they seem to be able to do it while still cutting costs. Imagine that!

[oldtype]

Ashley without Llambias and without the periodic fits of complete idiocy would be a pretty decent owner tbh.

[colinmk]

Ashley without Llambias and without the periodic fits of complete idiocy would be a pretty decent owner tbh.

 

If Shola played football like Messi he would be pretty decent too.

[Frazzle]

Ashley without Llambias and without the periodic fits of complete idiocy would be a pretty decent owner tbh.

 

You think Llambias does anything Ashley doesn't tell him to do?