Mike Ashley

[Unbelievable]

If he had not tried to buy the club on the sly I am sure, even from his sick bed, Shepherd would have been only too happy to tell him about any problems with the club to try and put him off buying it.

 

Wasn't the club up for sale unofficially regardless? I'm pretty sure there were a few others who had a look at the books and decided against buying. If Hall and Shepherd didn't want to sell the club, Ashley could never have bought it.

 

The club spent £6 Million (I believe it was iirc) in the financial year previous to Ashley buying it in activities related to trying to sell it. Dividends were drying up/had dried up, they wanted out.

 

Hall did, Shepherd didn't IIRC

[Unbelievable]

Have always wondered about the wisdom of using player amortisation to indicate the financial health of a club when what people really want to see is the actual profit/loss.

 

I don't really have any knowledge or a view on this, but why is player amortisation such a bad thing to include? If you spend loads of money on an asset that quickly becomes worthless, that's bad right?

 

If Mike Ashley could have easily refinanced the debt at favourable terms, why didn't he?

 

It just seems really arbitrary to me, forgotten how it works exactly but you'll have a player in the squad who was brought through the youth system who is worth millions but not in the eyes of the books or a £10m purchase that loses £2m value every 2 years over the course of their 5-year contract.

 

Someone remind me exactly how it works and I'll remember why I disagree with it.

 

I think that's exactly it. The accountancy valuation has not bearing in real (football) life terms, other than to write off a percentage of the original purchase price year on year until the asset has no value left. Messi would be worth 0 on Barcelona's accounts.

[madras]

the swiss ramble gives a decent breakdown so if you want to take out the amortisation you can. http://swissramble.blogspot.co.uk/2012/03/newcastle-united-life-in-northern-town.html. only goes upto 2011 though.

[AyeDubbleYoo]

If you spend loads of money on an asset that quickly becomes worthless, that's bad right?

 

FWIW it doesn't seem like anything as subjective as this (i.e. related to football performance/reality) is considered, it's just a figure based on cost that decreases through the course of the contract, whether relevant or not, as if the player's a piece of equipment that cannot actually increase in value (IIRC).

 

Yeah I see, in a way I guess it's a sensible way to account for player value, as it's a conservative/worst case scenario. It would be incredibly difficult and subjective to try to assess the actual current value of a player for each tax year, and a serious injury etc could reduce the value instantly. At least this way the paper value of the player is accounted for, even if it's rough.

[Interpolic]

If you spend loads of money on an asset that quickly becomes worthless, that's bad right?

 

FWIW it doesn't seem like anything as subjective as this (i.e. related to football performance/reality) is considered, it's just a figure based on cost that decreases through the course of the contract, whether relevant or not, as if the player's a piece of equipment that cannot actually increase in value (IIRC).

 

Yeah I see, in a way I guess it's a sensible way to account for player value, as it's a conservative/worst case scenario. It would be incredibly difficult and subjective to try to assess the actual current value of a player for each tax year, and a serious injury etc could reduce the value instantly. At least this way the paper value of the player is accounted for, even if it's rough.

 

It doesn't really do that though, someone like Giggs or Messi will be valued at nowt when they could have fetched millions.

[madras]

however, the loans he put in, some 140million worth were based on real debt at the bank, not accounting practises.

[Kanji]

Player amortization is f***ing idiotic imo. "Market value" should dictate that for players - just like in real estate the usage of cap-rates or multiples assist in valuing properties.

[TRon]

If he had not tried to buy the club on the sly I am sure, even from his sick bed, Shepherd would have been only too happy to tell him about any problems with the club to try and put him off buying it.

 

Wasn't the club up for sale unofficially regardless? I'm pretty sure there were a few others who had a look at the books and decided against buying. If Hall and Shepherd didn't want to sell the club, Ashley could never have bought it.

 

The club spent £6 Million (I believe it was iirc) in the financial year previous to Ashley buying it in activities related to trying to sell it. Dividends were drying up/had dried up, they wanted out.

 

Hall did, Shepherd didn't IIRC

 

What difference does it make? He still sold at the end of the day.

[r0cafella]

however, the loans he put in, some 140million worth were based on real debt at the bank, not accounting practises.

 

To save himself paying interest to a bank to be fair.

 

had he done due diligence he would have discovered this.

[AyeDubbleYoo]

If you spend loads of money on an asset that quickly becomes worthless, that's bad right?

 

FWIW it doesn't seem like anything as subjective as this (i.e. related to football performance/reality) is considered, it's just a figure based on cost that decreases through the course of the contract, whether relevant or not, as if the player's a piece of equipment that cannot actually increase in value (IIRC).

 

Yeah I see, in a way I guess it's a sensible way to account for player value, as it's a conservative/worst case scenario. It would be incredibly difficult and subjective to try to assess the actual current value of a player for each tax year, and a serious injury etc could reduce the value instantly. At least this way the paper value of the player is accounted for, even if it's rough.

 

It doesn't really do that though, someone like Giggs or Messi will be valued at nowt when they could have fetched millions.

 

True, but what I mean is, the worst case scenario (i.e. Giggs getting killed in a car crash tomorrow) is catered for. Any fee raised for him is a bonus.

[HawK]

however, the loans he put in, some 140million worth were based on real debt at the bank, not accounting practises.

 

To save himself paying interest to a bank to be fair.

 

had he done due diligence he would have discovered this.

 

The majority of the debt is caused by Ashley's acquisition in the first place - Stadium loan.

[Unbelievable]

If he had not tried to buy the club on the sly I am sure, even from his sick bed, Shepherd would have been only too happy to tell him about any problems with the club to try and put him off buying it.

 

Wasn't the club up for sale unofficially regardless? I'm pretty sure there were a few others who had a look at the books and decided against buying. If Hall and Shepherd didn't want to sell the club, Ashley could never have bought it.

 

The club spent £6 Million (I believe it was iirc) in the financial year previous to Ashley buying it in activities related to trying to sell it. Dividends were drying up/had dried up, they wanted out.

 

Hall did, Shepherd didn't IIRC

 

What difference does it make? He still sold at the end of the day.

 

As a minority shareholder he had no choice once Ashley acquired a certain percentage if memory serves. He certainly didn't want to sell to Ashley.

[jdckelly]

Player amortization is f***ing idiotic imo. "Market value" should dictate that for players - just like in real estate the usage of cap-rates or multiples assist in valuing properties.

I'm no accountant but isn't amortization basically a way to put the cost of buying a player over a period of time on the accounts, ie have £4m loss per season on a player over 5 years compared to £20m all at once? So basically it is based on market value but the market value you bought him for

[AyeDubbleYoo]

Player amortization is f***ing idiotic imo. "Market value" should dictate that for players - just like in real estate the usage of cap-rates or multiples assist in valuing properties.

I'm no accountant but isn't amortization basically a way to put the cost of buying a player over a period of time on the accounts, ie have £4m loss per season on a player over 5 years compared to £20m all at once? So basically it is based on market value but the market value you bought him for

 

I think so, yep. Obviously it's slightly less accurate in the case of players as they don't always depreciate and can actually be 'worth' more than their book value. The opposite is also true of course, which is why a purchase price based system is probably the best option available.

[Mattoon]

Player amortization is f***ing idiotic imo. "Market value" should dictate that for players - just like in real estate the usage of cap-rates or multiples assist in valuing properties.

I'm no accountant but isn't amortization basically a way to put the cost of buying a player over a period of time on the accounts, ie have £4m loss per season on a player over 5 years compared to £20m all at once? So basically it is based on market value but the market value you bought him for

 

I think so, yep. Obviously it's slightly less accurate in the case of players as they don't always depreciate and can actually be 'worth' more than their book value. The opposite is also true of course, which is why a purchase price based system is probably the best option available.

 

See Albert Luque

[Dokko]

Basically safe with nothing to play for...perfect time to sell all your star players.

 

Ride it out till the summer and sign all the frees, pay off £20-30m owed to him.

[TRon]

If he had not tried to buy the club on the sly I am sure, even from his sick bed, Shepherd would have been only too happy to tell him about any problems with the club to try and put him off buying it.

 

Wasn't the club up for sale unofficially regardless? I'm pretty sure there were a few others who had a look at the books and decided against buying. If Hall and Shepherd didn't want to sell the club, Ashley could never have bought it.

 

The club spent £6 Million (I believe it was iirc) in the financial year previous to Ashley buying it in activities related to trying to sell it. Dividends were drying up/had dried up, they wanted out.

 

Hall did, Shepherd didn't IIRC

 

What difference does it make? He still sold at the end of the day.

 

As a minority shareholder he had no choice once Ashley acquired a certain percentage if memory serves. He certainly didn't want to sell to Ashley.

 

Well we don't really know that do we, although he certainly publicly gave the impression he didn't want to sell. He certainly knew that other interested parties had looked over the books with a view to buying the club so it's not like he can claim to have not been a party to the club being sold.

[Toonpack]

If he had not tried to buy the club on the sly I am sure, even from his sick bed, Shepherd would have been only too happy to tell him about any problems with the club to try and put him off buying it.

 

Wasn't the club up for sale unofficially regardless? I'm pretty sure there were a few others who had a look at the books and decided against buying. If Hall and Shepherd didn't want to sell the club, Ashley could never have bought it.

 

The club spent £6 Million (I believe it was iirc) in the financial year previous to Ashley buying it in activities related to trying to sell it. Dividends were drying up/had dried up, they wanted out.

 

Hall did, Shepherd didn't IIRC

 

What difference does it make? He still sold at the end of the day.

 

If anyone believes Shepherd didn't want out, they're mad IMO, he was the Chairman/CEO of a company that had spent £6Mill trying to find a buyer, so he must have sanctioned that spend, and yet we're supposed to think he didn't want to sell ! It just doesn't stack up.

 

He played his sickbed attempt to leverage some more cash, into a "I never wanted to sell" story for the "Geordie nation's" consumption to near perfection.

[Guest neesy111]

If he had not tried to buy the club on the sly I am sure, even from his sick bed, Shepherd would have been only too happy to tell him about any problems with the club to try and put him off buying it.

 

Wasn't the club up for sale unofficially regardless? I'm pretty sure there were a few others who had a look at the books and decided against buying. If Hall and Shepherd didn't want to sell the club, Ashley could never have bought it.

 

The club spent £6 Million (I believe it was iirc) in the financial year previous to Ashley buying it in activities related to trying to sell it. Dividends were drying up/had dried up, they wanted out.

 

Hall did, Shepherd didn't IIRC

 

What difference does it make? He still sold at the end of the day.

 

As a minority shareholder he had no choice once Ashley acquired a certain percentage if memory serves. He certainly didn't want to sell to Ashley.

 

Well we don't really know that do we, although he certainly publicly gave the impression he didn't want to sell. He certainly knew that other interested parties had looked over the books with a view to buying the club so it's not like he can claim to have not been a party to the club being sold.

 

He was unhappy to sell as he wanted to buy the club outright at somepoint.

[BottledDog]

If he had not tried to buy the club on the sly I am sure, even from his sick bed, Shepherd would have been only too happy to tell him about any problems with the club to try and put him off buying it.

 

Wasn't the club up for sale unofficially regardless? I'm pretty sure there were a few others who had a look at the books and decided against buying. If Hall and Shepherd didn't want to sell the club, Ashley could never have bought it.

 

The club spent £6 Million (I believe it was iirc) in the financial year previous to Ashley buying it in activities related to trying to sell it. Dividends were drying up/had dried up, they wanted out.

 

Hall did, Shepherd didn't IIRC

 

What difference does it make? He still sold at the end of the day.

 

As a minority shareholder he had no choice once Ashley acquired a certain percentage if memory serves. He certainly didn't want to sell to Ashley.

 

Well we don't really know that do we, although he certainly publicly gave the impression he didn't want to sell. He certainly knew that other interested parties had looked over the books with a view to buying the club so it's not like he can claim to have not been a party to the club being sold.

 

He was unhappy to sell as he wanted to buy the club outright at somepoint.

 

I'm sure he did.

 

Would struggle to imagine how he thought he would he would have gone about doing that though.

[Paully]

Mike Ashley’s Debenhams bet takes another twist

 

'Baffling': analysts were left confused by the Sports Direct owner's moveNick Goodway

Published: 16 January 2014

Updated: 11:44, 16 January 2014

Newcastle United owner Mike Ashley’s Sports Direct investment in Debenhams took another twist today as it sold its 4.6% share stake in the struggling department stores chain but took a complex financial option which could see it buy an even larger stake at a cheaper price.

 

One veteran analyst described today’s announcement as “baffling”. Another said: “We all know Ashley likes a bit of a gamble. He’s doing it again.”

 

In effect, Ashley, pictured, is betting on Debenhams share price falling further in the medium term while at the same time continuing to develop links with the group to sell celebrity-backed fashion and more upmarket sports brands through its 170 UK stores.

 

Despite the complexity of the transaction its is understood that Sports Direct and Debenhams’ management to talk to each other at the highest level. Sports Direct revealed it had built up the 4.6% shareholding on Monday, 12 days after the chain issued a massive profits warning. It is believed Ashley’s group started buying shares around the 73p mark and carried on up to around 80p with an average price of around 75p.

 

Yesterday afternoon the entire stake of 56.8 million was sold in the market, reportedly to several different institutional investors, at a price of 83.2p. That would have netted a profit of some £4.5 million. At the same time Sports Direct entered into an option agreement over 81.2 million shares. It has written what is known as an “in-the-money put option” with an unnamed third party who has paid a premium (also undisclosed) to Sports Direct.

 

Ashley can buy the shares cheaply if they fall below a certain undisclosed exercise price but he can make no profit if they are above that price at the end of the option.

 

 

[BottledDog]

So let me get this straight.

 

We bought part of Gomis, then sold his shoulder to 5 different agents for an instant profit, but at the same time agreed to buy the lower half of his body because a mystery party (let's assume Trabzonspor) forced us to by offering a lucrative bung for no apparent reason. This means at some point we'll own a large chunk of Gomis, will be forced to buy the rest of his body for the sake of decency, and we'll have secured him on a 5 1/2 year contract once we pay his agent enough money to give Trabzonspor first option on his other players?

 

Fuck me, no wonder we have trouble signing people.

[quayside]

Easily the most stingy and least ambitious owner any PL club could ask for.

yet he's put in over 100million above the purchase price, is this right ?

 

Was that because he didn't do the correct due dill before buying? Just another f*** up, got his fingers burnt, tried to spend his way out, got his fingers burnt again. Now we have conservative mediocrity.

 

The main two things that due diligence would have revealed were that the debt was repayable on a change of ownership (that's a pretty common condition but its not always the case) and the club was in the process of losing about £30 million for the year.  Without being entirely sure why he bought us (and no one is) it's not easy to call whether he would have cracked on with the takeover if he was aware of those two issues. The club is actually in a far better state and  worth a lot more now than when he bought it that's for sure. Whether its worth more than he paid for it is another matter.

 

I'll bite.

 

"in the process of losing about £30 million for the year"

 

To be clear on this, the vast majority of this £30m "loss" was amortisation of players. It's an accountancy tool (which is quite flawed in the football club model) used to help value the assets of a company. This is not the same as the club spending £30m more than it brought in for the year as most people would understand that statement, and it is not as if Ashley suddenly had to find an extra £30m. I think the actual cash flow loss for the year was under £10m and included significant costs due to the takeover (director payoffs, loan early repayment costs, aborted refinancing costs, etc). The club was actually one of eight PL clubs to make profit before player amortisation & trading.

 

"due diligence"

 

I'm sick of this term being bandied about. Due diligence implies having a team of accountants and business analysts looking at the books and the fine print of contracts, etc over a period of weeks to look for problems. What we are talking about here that he is supposed to have missed when buying the club is absolute basic stuff that could be answered with a few questions. Ask any supporter who was remotely interested in the club's finances at the time and they could have told you about the repayment clause in the stadium loan. If he had not tried to buy the club on the sly I am sure, even from his sick bed, Shepherd would have been only too happy to tell him about any problems with the club to try and put him off buying it.

 

Not doing due diligence is the equivalent of buying a car without getting it checked over by the AA. If he really didn't know about loans becoming due or current year losses, then it's the equivalent of buying it without turning the engine on to see if it starts.

 

Refinancing the debt with Barclays wasn't an option. They called it in and in so doing took a lot of risk off their books. In June 2007 the club was technically insolvent, by somewhere between £80million and £90 million from memory. Why would anyone lend us anything in those circumstances? The credit crunch was big at the time as well and banks were crapping themselves. Ashley had to cough up.

 

No one would lend much on our balance sheet. The main thing that has been achieved under Ashley is some sort of financial stability on a year on year basis but we are still insolvent if he calls his debt in.  Thats why he has to guarantee not to do so every year, and that guarantee is recorded in the accounts.

 

Your memory is off by a bit I think. Net liabilities were £16m.

 

It's not ideal by any means, but many clubs are technically insolvent including the likes of Everton & Villa. It's actually mainly due to the under-valuation of most club's squads due to how the accountancy process works. Our squad in the last accounts for example was worth only £37m apparently. That's just over 1 Andy Carroll (it was actually valued at only £30m when we sold him). Transfermarkt, which while by no means perfect looks to have given most of our players reasonable valuations, has the squad valued at nearly £150m

 

No way the banks are going to pull the plug just because of an accounting practice poorly suited to the business.

 

 

2 years later when we got relegated we had a £36m overdraft. Not a loan secured against income or assets, a plain old bank overdraft. I think you over-egg the club's inability to get any loans, and in fact was in the process of a refinancing deal when Ashley bought the club.

 

Well hello again UV. I’ve written many words in debate with you on this subject over the years and stated my views. Nothing either of us has said has altered the other’s opinion and I don’t suppose it’s going to change now, but anyway:

 

This idea that amortisation is some sort of accounting concept that doesn’t matter is just wrong. It’s rather like a football club saying that their profit and loss account shows that they have broken even over a two year period. Then someone points out that they have spent £40 million on players over that period and they just say “well we don’t count that”. Amortisation relates to real money that the club has shelled out for players. As far as your suggestion on valuing players is concerned, how subjective is that? You would have to factor in unpredictables such as fluctuations in form and injuries. And you only have to read this forum to see that there are vastly different opinions on how good and indeed how valuable certain players are.

   

Your description of what happens during a due diligence process is indeed accurate. If we are to believe what has been reported (from Sir John Hall) Ashley acted rapidly as there was interest from a far eastern buyer – but they wanted to do due diligence which would take some time. Ashley was keen to do the deal so he went ahead and bought the Hall family out fairly quickly to close out the far eastern buyer. Shepherd and (I think) Chis Mort both stated that the bank’s change of ownership clause came as a surprise to Ashley. I agree with you it should not have. However you seem to think the clause was open knowledge to “any supporter who was interested in the clubs finances”. Where do you get that from? How would anyone know the conditions of a confidential document between the club and Barclays when it wasn’t disclosed in the accounts or was publicly available? And by the way there’s no need to get sick about discussion on the lack of due diligence. It isn’t cited as a defence of Ashley, it’s quite the opposite.

 

As a result of your post I’ve gone back and had a look at the old accounts (thanks for the rewarding experience). The  £80 to £90 million figure  I quoted from my memory was based on the accumulated trading losses (which were in fact £92 million) and you are quite  correct that the net liabilities at 30th June 2007 were around £16 million negative. Turning to the debt the bank was picking up interest at well over 7%. So why would they call it in if, as you say, the club was perfectly capable of servicing the debt? The truth has to be that they saw an opportunity to exit from a company that had racked up more than £90 million of trading losses and which gave them a higher risk exposure than they were prepared to tolerate. And since the club had accumulated those losses over several years and since amortisation spreads real costs over several years you cannot pass them off as being mostly down to a flawed accounting concept.

 

Finally you are incorrect when you say that the £36 million ”old fashioned” bank overdraft was unsecured. Note 12 in the 2009 accounts quite clearly states that it was secured on assets belonging to the club. No one lends £36 million without security. 

 

Your final sentence is interesting .  All we know is that they spent some money on a capital refinancing  project that was aborted when the takeover took place. Given that the bank fairly hastily invoked the clause that allowed it to call in its loan (which was repaid in September) would you care to tell us more?

 

[quayside]

We've been here many a time before and yet quayside in particular keeps banging this technically insolvent/would have done a Leeds/Portsmouth drum. Good post UV, as per.

 

Just seen this. I don't think I have ever said the club would do a Leeds or a Portsmouth. You can check my posts if you really want to and I'll own up if I'm wrong I simply state that the club was in a financial mess when Ashley bought it and (many times) have tried to explain why. I genuinely do not know what would have happened if the club had carried on under its previous ownership other than to believe there were serious financial issues.

[UV]

however, the loans he put in, some 140million worth were based on real debt at the bank, not accounting practises.

 

The net debt was around £70m when he took over. It quickly doubled because the club started buying players for cash up front while still selling players in instalments. So even if there was little or no net transfer spend, the visible debt still grew, but the club had IOUs for the likes of Parker, Dyer, Milner, etc.

 

Those IOUs were wiped out when we were relegated though (Ashley essentially bought the credit notes off the club) which is why the debt didn't rise when we were relegated.

 

 

If anyone believes Shepherd didn't want out, they're mad IMO, he was the Chairman/CEO of a company that had spent £6Mill trying to find a buyer, so he must have sanctioned that spend, and yet we're supposed to think he didn't want to sell ! It just doesn't stack up.

 

He played his sickbed attempt to leverage some more cash, into a "I never wanted to sell" story for the "Geordie nation's" consumption to near perfection.

 

 

Where does this £6m figure come from and what was it spent on? Even though Shepherd was the chairman, the Halls were the major shareholders and could out vote him on anything like that anyway.

 

If Shepherd wanted out, why did he keep buying more shares in the club and propose scrip dividends right up until the end? Why did Ashley buy Hall's shares on the QT without doing due diligence and without even consulting the other major shareholder if he also was keen to sell? If he was glad to be out why did he try to get a consortium together to buy the club back when Ashley put it up for sale when we were in the Championship?

 

That really is some conspiracy theory you've got going there. If you're right, Shepherd's a far better actor/liar than I gave him credit for, and is a persistent bugger carrying on the pretence for years afterwards. It must be for all the love it gets him from supporters.