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Mike Ashley Financial Acumen Proved A Myth

9 years ago

I have been following closely the ongoing debate regarding Mike Ashley.

While there is universal contempt for his behaviour at the club, there remains a number of people who defend the regime on the grounds of its financial responsibility.

The argument tends to go along the lines of ….. ‘he’s better than Shepherd who was driving the club to bankruptcy’, and/or , ‘we can’t compete with the likes of Man City or Chelsea anyway’.

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To be candid, I wouldn’t disagree with either assertion but for all that, I believe that Ashley has been an unmitigated disaster for the club in financial terms.

I have 30 years experience as a finance professional and the basic ground rules of a successful business are not rocket science … Maximise revenues .. Manage costs .. And invest for growth.

In terms of maximising revenues Ashley has been a disaster .

Commercial revenue has collapsed as Ashley takes free advertising and the ground naming farce created a toxic brand such that sponsorship , and the much vaunted naming rights, realised much less than comparable clubs.

Relegation and the failure to invest 2 years ago, cost significant TV cash. Bear in mind each league place is now worth around £1m. The alienation of the supporter base also costs and not just in terms of season ticket income, as it also deters the lucrative corporate customers.

Ashley is credited with controlling costs but even here his record is mixed. Yes we no longer buy over priced and often underperforming  ‘trophy’ players, and yes we have sourced some decent players relatively cheap ( though whether Carr’s achievements are good luck or good planning by Ashley is debatable).

However, the failure to perform due diligence cost an estimated £30m, then you have massive payouts to Wise, Keegan, Hughton, and now no doubt Kinnear also cost? Its definitely nice not to pay interest but when set against lost commercial revenue it’s dwarfed ( and is no doubt a handy tax deductible for Ashley) ….

Clearly the most controversial element of the Ashley era has been his failure to spend significantly. Of course there are those that say that in the world of Chelsea and Man City how can anyone without a sugar daddy ever compete. However, this misses the point.

All successful businesses need to invest at least roughly at a level commensurate with the competition. While not all investments will succeed and some companies can spend less but smarter ..over the longer term a company that fails to invest will fail.

The statistics are damning, according to respected ‘football facts’ website the average 5 yr spend of our top 20  clubs had been £70m a year. Excluding Chelsea and Man City that falls to £36m per club, even excluding all the “big 5” (we cannot dream to compete can we? ) the average is £29m.

In the same period Ashley has spent a negative £45m. To invest £75m less than your competitors is not financial propriety, it myopic stupidity.

Of course we can all have our views on how high a properly managed Newcastle could get!

Certainly most would agree that it’s increasingly difficult to break into the top 5.

Unfortunately, given this regime’s determination to waste what resources we do have, we are never likely to find out.


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