Mike Ashley

[Happy Face]

Yeah, THAT is the problem, not the amounts being spent.  In the words of Keegan “Mike Ashley doesn't know anything about football"

 

All he knows is business, and turning an overall profit on 3 players without an appearance between them in 14/15 is the sort of thing he'll continue to jump at.

 

My hope is that a better manager would actually be playing those players though.

[AyeDubbleYoo]

I'm not au fait with the financial terms, so is "amortisation", the decrease of a players value based on the contract payments? Or is it just an arbitrary figure?

 

Reducing the value of an asset over time. I guess with players it reflects the fact that they are worth less as their contracts run down and they age.

 

Also has a tax benefit because the amount lost each year reduces profit apparently:

http://lexicon.ft.com/Term?term=amortisation

 

'Depreciation' was the term I thought of and learned at school.

[Happy Face]

I'm not au fait with the financial terms, so is "amortisation", the decrease of a players value based on the contract payments? Or is it just an arbitrary figure?

 

Reducing the value of an asset over time. I guess with players it reflects the fact that they are worth less as their contracts run down and they age.

 

Also has a tax benefit because the amount lost reduces profit apparently:

http://lexicon.ft.com/Term?term=amortisation

 

cheers. If that's the case though, how is that calculated, especially considering you'd expect young players like Santon/MYM's value to increase over time, not decrease. Sissoko isn't getting less valuable the linger we have him.

 

He is, because if his contract expires he walks away for nothing.

[AyeDubbleYoo]

I guess you can account for an asset (like a player) based on purchase price and contract length. Accountancy probably doesn't allow for potential future increases in value.

 

Business is notoriously sceptical about future things like growth in value of assets. Hence why people on Dragon's Den get hammered for valuing their company too highly when they haven't made any money yet.

 

Remember we're just talking about accounting, it's an approximation of the real world for tax purposes.

[AyeDubbleYoo]

I think the main thing is that accounting can't account for football things like signing a player cheap and them becoming better. It can only account for the book value of assets over time.

 

One of the reasons why purely accounting decisions don't seem to make sense to fans.

[UV]

Going over old ground, but I fail to see why you keep looking at operational profit/loss as some indicator as to what Ashley might do on the transfer market, whilst ignoring what actually happens in terms of transfer fees incoming and outgoing?

 

Operating profit/loss is intrinsic to what the club can afford to do.

 

If the club is hemorrhaging £30m a year before player trading, then players have to be sold to plug that leak.

 

If the club is just about breaking even then players have to be sold before we can buy.

 

If the club is earning £30m, then we can spend that on players before we sell anyone.

 

That's not true like, not at all.

 

Amortisation which hits that profit isn't cash hemorrhaging out of the club (especially as these days the transfer fee is usually paid up front). You don't have to desperately sell players to cover the amortisation loses to stop the debt growing. If the club is breaking even after amortisation, then it will almost certainly have a decent positive cashflow (ie money which could be used to pay off debt, buy players without selling, or sit in the bank).

 

This operating profit/loss before player trading is a false position to use when you're talking about how much the club has to spend.

 

[Happy Face]

Going over old ground, but I fail to see why you keep looking at operational profit/loss as some indicator as to what Ashley might do on the transfer market, whilst ignoring what actually happens in terms of transfer fees incoming and outgoing?

 

Operating profit/loss is intrinsic to what the club can afford to do.

 

If the club is hemorrhaging £30m a year before player trading, then players have to be sold to plug that leak.

 

If the club is just about breaking even then players have to be sold before we can buy.

 

If the club is earning £30m, then we can spend that on players before we sell anyone.

 

That's not true like, not at all.

 

Amortisation which hits that profit isn't cash hemorrhaging out of the club (especially as these days the transfer fee is usually paid up front). You don't have to desperately sell players to cover the amortisation loses to stop the debt growing. If the club is breaking even after amortisation, then it will almost certainly have a decent positive cashflow (ie money which could be used to pay off debt, buy players without selling, or sit in the bank).

 

This operating profit/loss before player trading is a false position to use when you're talking about how much the club has to spend.

 

But then you're getting into complex accounting practices most people aren't interested in, and I struggle with myself.  But I can follow that through to some degree....

 

In 13/14 we sold Cabaye for £19m and bought no-one,  most would call that a £19m profit, but it wasn't, amortisation came into play as in my previous pic and the player trading for the year actually showed a profit on £16.9m. A couple of million less than people would assume.

 

In 14/15 keeping it simple we spent £37.4m but recouped £18.3m, which means we spent £19.1m.  However accounting for amortisation, the actual accounting profits on those sold were...

 

Debuchy +£6.36

Mbiwa +£1.24

Santon +£1.74

Ben Arfa -£0.73

 

Giving a total of just £8.62m recouped, ten million less than the laymans view.  That means our net spend in 14/15 was more like £29m.  £10m more than most assume.

[Andymc1]

Going over old ground, but I fail to see why you keep looking at operational profit/loss as some indicator as to what Ashley might do on the transfer market, whilst ignoring what actually happens in terms of transfer fees incoming and outgoing?

 

Operating profit/loss is intrinsic to what the club can afford to do.

 

If the club is hemorrhaging £30m a year before player trading, then players have to be sold to plug that leak.

 

If the club is just about breaking even then players have to be sold before we can buy.

 

If the club is earning £30m, then we can spend that on players before we sell anyone.

 

That's not true like, not at all.

 

Amortisation which hits that profit isn't cash hemorrhaging out of the club (especially as these days the transfer fee is usually paid up front). You don't have to desperately sell players to cover the amortisation loses to stop the debt growing. If the club is breaking even after amortisation, then it will almost certainly have a decent positive cashflow (ie money which could be used to pay off debt, buy players without selling, or sit in the bank).

 

This operating profit/loss before player trading is a false position to use when you're talking about how much the club has to spend.

 

But then you're getting into complex accounting practices most people aren't interested in, and I struggle with myself.  But I can follow that through to some degree....

 

In 13/14 we sold Cabaye for £19m and bought no-one,  most would call that a £19m profit, but it wasn't, amortisation came into play as in my previous pic and the player trading for the year actually showed a profit on £16.9m. A couple of million less than people would assume.

 

In 14/15 keeping it simple we spent £37m but recouped £18.3m, which means we spent £19.1m.  However accounting for amortisation, the actual accounting profits on those sold were...

 

Debuchy +£6.36

Mbiwa +£1.24

Santon +£1.74

Ben Arfa -£0.73

 

Giving a total of just £8.62m recouped, ten million less than the laymans view.  That means our net spend in 14/15 was more like £29m.  £10m more than most assume.

 

We received money for Pardew as well.

[Happy Face]

Going over old ground, but I fail to see why you keep looking at operational profit/loss as some indicator as to what Ashley might do on the transfer market, whilst ignoring what actually happens in terms of transfer fees incoming and outgoing?

 

Operating profit/loss is intrinsic to what the club can afford to do.

 

If the club is hemorrhaging £30m a year before player trading, then players have to be sold to plug that leak.

 

If the club is just about breaking even then players have to be sold before we can buy.

 

If the club is earning £30m, then we can spend that on players before we sell anyone.

 

That's not true like, not at all.

 

Amortisation which hits that profit isn't cash hemorrhaging out of the club (especially as these days the transfer fee is usually paid up front). You don't have to desperately sell players to cover the amortisation loses to stop the debt growing. If the club is breaking even after amortisation, then it will almost certainly have a decent positive cashflow (ie money which could be used to pay off debt, buy players without selling, or sit in the bank).

 

This operating profit/loss before player trading is a false position to use when you're talking about how much the club has to spend.

 

But then you're getting into complex accounting practices most people aren't interested in, and I struggle with myself.  But I can follow that through to some degree....

 

In 13/14 we sold Cabaye for £19m and bought no-one,  most would call that a £19m profit, but it wasn't, amortisation came into play as in my previous pic and the player trading for the year actually showed a profit on £16.9m. A couple of million less than people would assume.

 

In 14/15 keeping it simple we spent £37m but recouped £18.3m, which means we spent £19.1m.  However accounting for amortisation, the actual accounting profits on those sold were...

 

Debuchy +£6.36

Mbiwa +£1.24

Santon +£1.74

Ben Arfa -£0.73

 

Giving a total of just £8.62m recouped, ten million less than the laymans view.  That means our net spend in 14/15 was more like £29m.  £10m more than most assume.

 

We received money for Pardew as well.

 

Spot on.

 

And I'll never be able to get even the transfer fees right as none are disclosed, let alone calculating the amortisation exactly.  It's all educated guesswork.

 

But comparing the operating profit to total profit before tax gives an accurate picture of how the club has mitigated losses (or reinvested profits once we get a set of accounts that shows an operating profit).

[Andymc1]

No businesses accounts are the truth anyway so it's all complete guesswork.

[UV]

Going over old ground, but I fail to see why you keep looking at operational profit/loss as some indicator as to what Ashley might do on the transfer market, whilst ignoring what actually happens in terms of transfer fees incoming and outgoing?

 

Operating profit/loss is intrinsic to what the club can afford to do.

 

If the club is hemorrhaging £30m a year before player trading, then players have to be sold to plug that leak.

 

If the club is just about breaking even then players have to be sold before we can buy.

 

If the club is earning £30m, then we can spend that on players before we sell anyone.

 

That's not true like, not at all.

 

Amortisation which hits that profit isn't cash hemorrhaging out of the club (especially as these days the transfer fee is usually paid up front). You don't have to desperately sell players to cover the amortisation loses to stop the debt growing. If the club is breaking even after amortisation, then it will almost certainly have a decent positive cashflow (ie money which could be used to pay off debt, buy players without selling, or sit in the bank).

 

This operating profit/loss before player trading is a false position to use when you're talking about how much the club has to spend.

 

But then you're getting into complex accounting practices most people aren't interested in, and I struggle with myself.  But I can follow that through to some degree....

 

In 13/14 we sold Cabaye for £19m and bought no-one,  most would call that a £19m profit, but it wasn't, amortisation came into play as in my previous pic and the player trading for the year actually showed a profit on £16.9m. A couple of million less than people would assume.

 

In 14/15 keeping it simple we spent £37.4m but recouped £18.3m, which means we spent £19.1m.  However accounting for amortisation, the actual accounting profits on those sold were...

 

Debuchy +£6.36

Mbiwa +£1.24

Santon +£1.74

Ben Arfa -£0.73

 

Giving a total of just £8.62m recouped, ten million less than the laymans view.  That means our net spend in 14/15 was more like £29m.  £10m more than most assume.

 

So why do you insist on using profit before player trading as your metric? Why not just use cashflow? It's far simpler, and much closer to what us non-accountants understand as profit/loss.

[binnsy]

I take it Ashley lied again when he said he would put £20m a year into the club?

[BottledDog]

I take it Ashley lied again when he said he would put £20m a year into the club?

 

I think the intention was there, things clearly changed during Keegangate.

[AyeDubbleYoo]

Surely the most important figure is overall profit or loss?

[binnsy]

I take it Ashley lied again when he said he would put £20m a year into the club?

 

I think the intention was there, things clearly changed during Keegangate.

 

i am sure that "promise" was repeated a couple of years ago though, after the KK stuff.  I could be wrong though. 

[Happy Face]

Surely the most important figure is overall profit or loss?

 

Yes, and the total losses under Ashley are still £8.7m.  Accounts coming soon will take nufc into overall profit for the first time since Ashley arrived.

 

 

[Happy Face]

So why do you insist on using profit before player trading as your metric? Why not just use cashflow? It's far simpler, and much closer to what us non-accountants understand as profit/loss.

 

I don't insist on using anything, I provided before player trading AND before Tax.  Happy to be corrected with any metric.

 

 

[sempuki]

Get your balance sheet out for the lads.

[AyeDubbleYoo]

Get your balance sheet out for the lads.

 

Profit and loss account for me like.

[The College Dropout]

Surely the most important figure is overall profit or loss?

 

No - cash flow is.

 

Profit is simply an accounting term.  You can do a level of magic on a profit/loss account. You can make profit and have no cash, and vice versa. Amazon doesn't turn a profit but has way more cash than us.

[Andymc1]

Surely the most important figure is overall profit or loss?

 

No - cash flow is.

 

Profit is simply an accounting term.  You can do a level of magic on a profit/loss account. You can make profit and have no cash, and vice versa. Amazon doesn't turn a profit but has way more cash than us.

 

Like I said earlier, the accounts for 99% of companies are pure lies.

 

Saying Amazon doesn't turn a profit is a load of shite though - the UK company, amazon.co.uk Ltd had a profit of £12,926,000 after tax in their last entered accounts and their cash balance was £1,000. So aye, as much as accounts are bollocks, you're also talking bollocks.

[Interpolic]

[Paully]

Apologies if already posted!

 

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11495410/Sports-Direct-is-immoral-and-callous-say-MPs.html

[AyeDubbleYoo]

Surely the most important figure is overall profit or loss?

 

No - cash flow is.

 

Profit is simply an accounting term.  You can do a level of magic on a profit/loss account. You can make profit and have no cash, and vice versa. Amazon doesn't turn a profit but has way more cash than us.

 

I know cash flow is very important to the business as a going concern, but surely if you're constantly making losses (real losses of course) then you can't spend any cash.

[The College Dropout]

Surely the most important figure is overall profit or loss?

 

No - cash flow is.

 

Profit is simply an accounting term.  You can do a level of magic on a profit/loss account. You can make profit and have no cash, and vice versa. Amazon doesn't turn a profit but has way more cash than us.

 

Like I said earlier, the accounts for 99% of companies are pure lies.

 

Saying Amazon doesn't turn a profit is a load of s**** though - the UK company, amazon.co.uk Ltd had a profit of £12,926,000 after tax in their last entered accounts and their cash balance was £1,000. So aye, as much as accounts are bollocks, you're also talking bollocks.

 

"Still, Amazon had a loss of $241 million for the full fiscal year, as operating expenses climbed 20% to $88.8 billion, essentially wiping out $89 billion in sales." - Wall Street Journal, January 2015

http://www.wsj.com/articles/amazons-profit-drop-less-than-expected-1422565755

 

But let's take a long-term view of their accounts

 

http://static1.squarespace.com/static/50363cf324ac8e905e7df861/t/5408fa05e4b0d4cc06b03c6d/1409874438232/?format=750w

 

This article and the comments is an interesting read and gives some good information on how things aren't black & white.

 

http://ben-evans.com/benedictevans/2014/9/4/why-amazon-has-no-profits-and-why-it-works

 

Oh and Ian - Amazon have loads of cash. Billions.

 

"In any case, profits as reported in the net income line are a pretty bad way to try to understand a business like this - actual cash flow is better. As the saying goes, profit is opinion but cash is a fact, and Amazon itself talks about cash flow, not net income (Enron, for obvious and nefarious reasons, was the other way around). Amazon focuses very much on free cash flow (FCF), but it’s very useful to look also at operating cash flow (OCF), which is simply what you get adding back capital expenditure (‘capex'). In effect, OCF is the bulk of  running the business before the costs of the infrastructure, M&A and financing costs. This shows you the effect of selling at low prices. As we can see here, Amazon’s OCF margin has been very roughly stable for a decade, but the FCF has fallen, due to radically increased capex."