Chronicle tonight. NUFC Finances.

[Guest]

Basically, the "other side" of the story (or at least a more balanced report) of the drivel that MacBeth comes up with.

 

Part 2: Special report on the situation at United

Apr 20 2007

By Adam Jupp and Lee Ryder, The Evening Chronicle

 

 

Missing Out on Europe could damage United on world stage

 

In part two of our special report on the future of Newcastle United, we look at the club's financial situation. Chronicle Chief Reporter Adam Jupp met with football finance expert Richard Slack, of Northumbria University, to investigate the state of the club's finances.

 

Is the club making or losing money?

 

For the 11 months ending in June 2006, the club recorded a loss of £12.03m.

 

Mr Slack said: "It is not unusual for football clubs to record a loss. It is a unique industry in that sense. Chelsea are the biggest loss-making business in football, but are hugely successful.

 

"People will wonder how long the club can go on losing money? Well, it's not uncommon for Premier League clubs to lose money and it can probably go on for a relatively long period of time.

 

"The danger comes if you are relegated because the losses you are already making become substantial and that's when creditors say they want to be re-paid. But I still think that is unlikely in Newcastle's case."

 

Last year, the club earned £6.78m by finishing seventh. Seventh is the highest position the Magpies could finish this season, if they won all their remaining games and the sides above them lost theirs.

 

This is likely to mean they will receive less prize money. The amount handed out decreases by £500,000 per place in the league.

 

If Newcastle were to finish in 12th spot, they would pull in more than £3m less than last season.

 

Not qualifying for Europe would also impact the club's revenue in more than one way.

 

Mr Slack said: "The club's interim report mentions the money they got from Channel Five and from playing games in the InterToto Cup and the UEFA Cup.

 

"Obviously, if they did not qualify for Europe, that money would not come in. If you look at Arsenal, they are desperate to get into the Champions League.

 

"Can Arsenal afford not to be in the Champions League? Maybe not. Can Newcastle afford not to be in the Champions League? Yes.

 

"Can they afford not to be in the UEFA Cup? Probably, but in order for the club to market itself to new audiences, being in these competitions is important.

 

"When you look at fans from other countries, why do they become Arsenal or Chelsea fans? It's because they're on the telly. More of their Premier League games are televised because they are doing well and their European games are shown all over the world as well.

 

"Their brands are re-affirmed all the time. But, you have to ask the question, if you are from a foreign country, why would you want to follow Newcastle? Newcastle have to compete with a number of clubs who are all competing to fill those fifth, sixth and seventh places."

 

Next season, the club's coffers will be boosted by a huge hike in prize money given to Premier League clubs as a result of a new television deal.

 

Even the club that finishes last will earn £30m.

 

In terms of attendances, St James' Park had an occupancy rate of 95%, with an average gate of 49,725.

 

Mr Slack said: "With it being at 95%, there's not much scope to massively increase the money brought in from gate receipts.

 

"The concern would be that, if attendences go down, the fear among fans of not being able to get a ticket reduces. That makes it less vital to have a season ticket and fewer people might renew their season tickets, making the income you will get less reliable.

 

"Expanding the stadium will of course give the opportunity to bring in more money through season ticket sales and gate receipts.

 

"But there is also danger that more tickets will be available on a match-to-match basis, meaning fewer people will have that fear that they have to have a season ticket to get to see the team and that could have an impact on season ticket sales."

 

How much debt is the club in?

 

The club's interim report states that it has total liabilities of £152.7m.

 

But not all of this should be viewed as debt.

 

The Magpies have taken out long-term interest-bearing loans worth £48.17m.

 

It has also short-term interest-bearing loans of £11.89m and a bank overdraft of £20.8m. That gives a total debt of £80.9m.

 

That sounds like a lot but is it really in football terms?

 

Mr Slack said: "Can they afford their debt? Yes, they probably can.

 

"Is it a horrific amount? Not really, as long as they can afford the interest. The accounts show financial expenses of just more than £6m a year. That will be the interest of these loans and that's a relatively fixed cost."

 

So if the club can afford to cope with the current level of debt, can they afford to get into more debt, to finance player purchases?"

 

Mr Slack added: "In terms of their ability to borrow a lot more money, I would say it's more limited than it once was.

 

"They have already got debts and it looks like their income is likely to decrease, with the probability of not playing in Europe and receiving less prize money than they did last year."

 

How much are the players' wages?

 

The interim report states that wages and salaries increased by 1% from £26.8m to £27m.

 

Mr Slack said: "A general rule is that clubs don't like to spend more than 50% of their revenue on wages.

 

"The current amount is just under 60% and if you were to take out of the equation the amount of compensation they are receiving for Michael Owen's injury, it would be more like 66%.

 

"So, can the club afford new signings without getting rid of existing players? You would have to look at where the extra money was going to come from. The club are probably relatively close to their buffer in terms of the amount they want to spend on wages."

 

How much would it cost to buy the club?

 

The club's current share price is 61.3p. This compares to a high over the last year of 84p and a low of 40.2p.

 

There are more than 133 million shares, which means the face value of the club is around £81.1m.

 

However, it is likely the current shareholders would want to sell their shares at a premium.

 

Mr Slack said: "You could be looking at anything from a 10-30% premium on the shares. Because of that, I would say someone would have to pay at least £100m to buy the club.

 

"Of course, the problem is that if you buy the club, you don't just get the shares, you get the debt too. And anyone stepping in would have to add on to that any money the buyers would want to spend on transfers."

 

Will anyone buy the club?

 

Mr Slack said: "The problem with buying a club is that not only do you pay money to get the value of the club, you inherit the debt too.

 

"If you buy Newcastle for £80m, or whatever the figure might be, that's just the purchase of it. You own Newcastle United PLC, but you also own the £80m debt.

 

"If you look at the guy who bought West Ham, you have to think, why on earth did he buy them?

 

"If they get relegated, as it looks like they will, then they still have the debt, they have a reduced income and their brand isn't worth anywhere as near as much as it used to be.

 

"Newcastle aren't in that category. They are relatively safe but Newcastle's problem is that the club's income is a bit more variable than it was before."

 

Mr Slack added: "Unless you had someone who wanted the club from a passion point of view, why would you want to buy a loss-making club?

 

"If you look at Abramovich at Chelsea, he has spent a lot of personal money and they are one of the biggest loss-making clubs.

 

"And then there was Jack Walker at Blackburn, who also spent a lot of money and almost created success because he had a personal passion for the club.

 

"From a business point of view, would you buy Newcastle United compared to buying any other mid-table Premier League club?

 

"It seems like a remote chance but then you have to say why did that American buy Aston Villa?

 

"That is probably a loss-making club but maybe he got the club for a relatively low premium on the shares.

 

"We just don't know what the current board would want for their shares in terms of a premium.

 

"Football is a fairly easy business model - get the football model right and the off-the-pitch model follows. But getting that success on the pitch is the problem.

 

"The idea of there being a business buyer around the corner I think is fairly remote. Then you're looking at a billionaire like Abramovich coming in and buying the club because of a passion for the game.

 

"Someone like that can afford to take gambles on buying players who might not perform. The problem is you just don't know whether that kind of buyer is round the corner or not."

 

The future isn't as bleak as some seem to imagine

 

Fanzine editor Mark Jensen does not believe that the dream of the Champions League is as far away as many people think, (writes Lee Ryder).

 

Despite the fact that Liverpool, Manchester United, Chelsea and Aston Villa all have undergone multi-million takeovers, Jensen feels that a sensible approach to adjusting the squad is the best way forward.

 

Jensen said: "I don't think the emergence of the clubs taken over by tycoons make the top four further away from Newcastle United.

 

"I think a clear-out that should have happened last summer needs to take place this summer for sure to get the club back on track.

 

"When Newcastle qualified for the Champions League, under Sir Bobby Robson, they went from mid-table, where they are now, on the back of two key signings.

 

"Back then we signed Craig Bellamy and Laurent Robert, and they are two good players who have since left too quickly and too cheaply.

 

"And even though the likes of Amady Faye have also left, another clear-out is needed now.

 

"There are plenty of fans who want to see Celestine Babayaro, Stephen Carr, Titus Bramble and Albert Luque all leave the club but when you consider that six players should have come in last summer and didn't, and four or five need to come in this summer, that's into double figures how many should come in, if the rest are to leave.

 

"That might not happen and some of them may stay but I think a minimum of five new faces are needed if we are to push on back to our ultimate aim which has to be the top four.

 

"When I looked at the table a few weeks ago we were only 12 points off Arsenal which is not a million miles away.

 

"And while Chelsea and Manchester United have pulled away I think Arsenal and Liverpool haven't done the same.

 

"Another interesting point is that when you look at Newcastle's results in the Premiership against the top teams, they are eighth in the table with those points. But the results against the team in the bottom 10 alarmingly see us in 18th.

 

"That means that week-in, week-out, we have to get down to the job of beating your Man Citys and Fulhams and look at picking up points from Liverpool and Manchester United etc, as a bonus."

 

However, many fans fear the worst, with neighbours Sunderland now threatening to overtake Newcastle.

 

Yet Jensen isn't convinced a red-and-white revolution is about to inflict more pain on Toon fans.

 

He went on: "Sunderland are emerging and I know a few seasons ago they came up with record points, but not long after they were sporting a different record and not as favourable.

 

"Perhaps they have got ideas and plans next season but Newcastle and Freddy Shepherd need to use that to inspire them.

 

"It is the time to sort out their act in Newcastle's case.

 

"Unlike Sunderland and Middlesbrough, our expectations aren't to finish ahead of our rivals. It is simply to finish in the top four."

[Guest Gemmill]

I wonder if we'll get to hear Alan Oliver's son's opinions on things like our astronomical overdraft etc.

[Guest TheKingOfNewcastle]

What sort of wages was Souness allowed to dish out? He reduced the size of the squad and Roeder has reduced it further, yet the wages to income ratio has rocketed.

 

We've got a bunch of fucking clueless cunts running the club.

[Ayerso]

One thing i dont get is how our wage bill could have went up since last year when you look at who came in and who left:

 

Players In:

Martins

Duff

Sibieski

Bernard

Rossi

Pav

Gooch

 

Players Out:

Shearer

Bowyer

Boumsong

Faye

Elliot

Vianne

Chopra

Caig

[Rich]

I've wondered the same myself, but Kieron Dyer's new contract (among others) might have something to do with it?

[Guest Knightrider]

All everyone needs to know is that since this board took over the club's value has been more than halved, our wages have risen staggeringly, despite continued failings on the pitch and we have wasted a lot of money. Any person who sanctions the sale of a warehouse (to his brother) using the clubs money, and then rents that warehouse back (using the club's money) at twice the cost of the sale, should never be trusted with finances. Again the Chronicle tip-toe over an issue that needs proper attention. Say what you will about Macbeth's site but at least he's showing how inept these idiots are and lets not forget, he's just a fan like all of us and wants what's best for the club, he makes no money from his site, it stands to show how good or bad as they are, our finances.

[James]

One thing i dont get is how our wage bill could have went up since last year when you look at who came in and who left

 

 

New contracts for a start, N'Zogbia, Taylor, Given, Harper and Ramage all got new contracts iirc. In addition, some players get loyalty payrise clauses, so they may have increased wages.

[Guest Alan Shearer 9]

The wages situation is unacceptable. Too many players being paid far too much. It has to be addressed.

[stozo]

The wages situation is unacceptable. Too many players being paid far too much. It has to be addressed.

It's all very well saying that but how do we do it. I don't imagine too many players will be putting themselves forward for pay cuts and the only thing we have to attract players this summer is the money.

[Guest Alan Shearer 9]

The wages situation is unacceptable. Too many players being paid far too much. It has to be addressed.

It's all very well saying that but how do we do it. I don't imagine too many players will be putting themselves forward for pay cuts and the only thing we have to attract players this summer is the money.

 

By selling over paid players who aren't producing ie Dyer, Emre, Luque, Carr, Babayaro, etc.

[Mr Logic]

The players that need cleared out would leave us so thin that you would need 8 or 9 coming through the door. I am not usually given to pessimism but taking the club as a whole this is a very tricky period, and given their track record you can see where optimism is scarce.

 

More than anything they need a sound 'footballing' plan, get that right and the finances will take care of themselves. If they try and move forward with a half-arsed financial plan they are tempting disaster imo.

[KaKa]

We really need to do an Arsenal right now...and this is why I have been encouraged by Roeders desire to emulate Wenger.

 

We essentially need to bring in young up and coming players who are still fairly priced and who would not yet be in a position to command large salaries. We also have to really work hard this summer to discover some players for ourselves and be able to evaluate talent on our own and not have to pay top money for players other teams have discovered. We need to discover our own Chimbondas basically!

 

If we can do this we will be fine and we will be able to build up the squad without spending a ridiculous amount of money which will be good for us financially.

[GM]

Whilst reading this bit:

 

Will anyone buy the club?

 

Mr Slack said: "The problem with buying a club is that not only do you pay money to get the value of the club, you inherit the debt too.

 

"If you buy Newcastle for £80m, or whatever the figure might be, that's just the purchase of it. You own Newcastle United PLC, but you also own the £80m debt.

 

I couldn't help thinking "what motivation has Shepherd got to reduce the overdraft if (as we all know) he wants to deter any takeover bids?" - none presumably. Probably too cynical of me I know but there's every chance he's managing the club's finances in this way deliberately to make sure nobody else will touch it with a bargepole, thereby manipulating the Halls into selling up to him. Possible?

[tmonkey]

I've wondered the same myself, but Kieron Dyer's new contract (among others) might have something to do with it?

 

Things like signing a backup left winger for 5mill and 70 or 80k per week dont help.

[Rich]

I've wondered the same myself, but Kieron Dyer's new contract (among others) might have something to do with it?

 

Things like signing a backup left winger for 5mill and 70 or 80k per week dont help.

 

The point had already been covered about the players who had come in/gone out, the lad was asking for other reasons as to how the wage bill could have increased.

[tmonkey]

I've wondered the same myself, but Kieron Dyer's new contract (among others) might have something to do with it?

 

Things like signing a backup left winger for 5mill and 70 or 80k per week dont help.

 

The point had already been covered about the players who had come in/gone out, the lad was asking for other reasons as to how the wage bill could have increased.

 

It was an attempt to bait someone, for which ive been warned.

 

Anyway, with regards to the increase in wages/salaries, from that list of outgoing players, we may not have been paying Viana's wages, we still might be paying part of the wages of some who have left (eg Boumsong, Bowyer), Shearer hasnt left the club's payroll as he may be getting a wage as ambassador, weve surely appointed more staff with the addition of Roeder (Bond, Pearsen), some players will have signed new contracts - eg Zog, Given(?), or recieved a pay rise (as you say, Dyer).

[Karjala]

By selling over paid players who aren't producing ie Dyer, Emre, Luque, Carr, Babayaro, etc.

And who will buy them?? The problem is that we pay Top 5 Team wages, but non of the other 4 teams who can afford to pay out so much, would be interested in taking any of them on. If a mediocre team wanted to buy any, we'd have to continue to pay 50% of their wage!

Who in the PL would pay Dyer £80k a week for what you get out of him?

Who in the PL would want Carr and Baba, and pay what we are paying them - £30-40k each?

Fair enough, maybes Emre will have some interested buyers, and possibly Luque, but Luque has basically been on the market for the last year, and nobody has shown any concetre interest apart from PSV who cant afford his wages...

[Rich]

I've wondered the same myself, but Kieron Dyer's new contract (among others) might have something to do with it?

 

Things like signing a backup left winger for 5mill and 70 or 80k per week dont help.

 

The point had already been covered about the players who had come in/gone out, the lad was asking for other reasons as to how the wage bill could have increased.

 

It was an attempt to bait someone, for which ive been warned.

 

Anyway, with regards to the increase in wages/salaries, from that list of outgoing players, we may not have been paying Viana's wages, we still might be paying part of the wages of some who have left (eg Boumsong, Bowyer), Shearer hasnt left the club's payroll as he may be getting a wage as ambassador, weve surely appointed more staff with the addition of Roeder (Bond, Pearsen), some players will have signed new contracts - eg Zog, Given(?), or recieved a pay rise (as you say, Dyer).

 

I thought the bold bit was exactly that, hence why I jumped in ASAP to get you posting sense again.

 

You're right about the rest of the stuff. Although if Shearer is getting paid for being an ambassador I'd be shocked, personally. I'm surprised the wage bill has increased in the first place, judging by the players we sold/brought in - and I didn't expect that people's contracts would fluctuate all that much in the space of one season. Even though it's "only" 1% I thought we'd have made progress towards reducing it in the summer, more than anything.

 

This summer I can only see more people going out than getting brought in, because of that. As MJ said previously, it's going to be difficult to decrease the wage-bill while improving the squad so the payoff will probably be a few more "free" players coming in and using the transfer budget money to go towards the wages.

[Mick]

The stupid thing about our wages is that the squad numbers are reducing while the wage bill goes up, work that one out.

[The College Dropout]

The wages situation is unacceptable. Too many players being paid far too much. It has to be addressed.

 

That is the key but these players wont move. Ideally Dyer would be at the top of the list even though he's one of our better players but I doubt many teams will want to pay half of his wages let alone match it.

 

We need to go back to the SBR system of buying young players for fairly high fees but modest wages. We've gone from the Jermaine Jenas' of the world to the Scott Parker's for much higher wages but very similar performances. We need a massive clear-out which should include the likes of Emre and Parker...unfortunately we don't have a Harry Redknapp or Big Sam who are capable of being the "clean-up man".

 

Duff, Emre and Parker would make a start, that's probably £130k a week if not more. Could we even sell Carr or Babayaro?

[Karjala]

The stupid thing about our wages is that the squad numbers are reducing while the wage bill goes up, work that one out.

And our league position goes down at the same time...