The journalist Luke Edwards has produced a piece in the Daily Telegraph suggesting that Mike Ashley may be preparing to sell Newcastle United.
Edwards has an interesting relationship with Newcastle United. Currently banned from press activity, he has been outspoken before on player discontent and other issues. However, much of what he says has substance and has later proved to be highly credible.
Some of the material is sourced; the club statement that Ashley will not sell before 2016 at the earliest “at any price.” There are other statements from Alan Shearer who has been suggested to have been prepared to front other consortia, credence having been given to these by Shearer’s own presence on flights to and from exotic arab holiday destinations where many rich Premier League players own property.
The suggested figure is around £250m, coincidentally a figure apparently plucked from the air by club President, Sir John Hall, when interviewed for Radio 5 Live’s Sunday morning programme last weekend.
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Further evidence may be the delay in appointing a new manager to the north east. Does this give any potential new owner or consortium the opportunity to put their own man in? Could that man be Shearer himself?
Those wishing Ashley out will hope that these reports have substance. Not being sold ‘at any price’ being apparently reinforced by the Press Office at St James’ Park, will bring back memories of Andy Carroll’s sale, since he was ‘going nowhere’, ‘not in this transfer window’, ‘not at any price’, just before he was put into Ashley’s helicopter to be taken to Liverpool. Could Ashley’s helicopter be making a one way journey this time, with an even more influential passenger?
Another part of the equation is the Rangers situation. Ashley has engaged in a battle for control, unless his short-term cash outlays are merely a philanthropic act to support Scottish football.
Having two of his appointees on the Rangers’ board, his generosity has been reinforced. Ashley has options; NUFC, Rangers or even to develop his sporting model along the lines of Gianpaolo Pozzo who owns top tier teams Udinese and Granada, as well as Championship Watford.
So why would Ashley want to sell? Admittedly, he does not enjoy the best of relationships with supporters on Tyneside. The quality of football on offer in 2014 was not generally of the highest standard, his having to sit and endure a run of only 5 wins in 25, a 7 Premier league game winless run at the start of the season, patchy form in December, a record run of defeats against local rivals, 1 FA Cup tie win since Keegan left.
Probably the biggest key factor here is in the price, £250m. Certainly, this would represent a significant profit on what he paid for Newcastle United shares. What is totally up in the air is what about the outstanding debt that the club owes Ashley himself, which if included would show a loss? One would imagine that there would be a similar provision as there was to the mortgage on the ground owed when Ashley bought Newcastle.
Taking a longer look at this price, it is worth exploring other evidence about the financial side of the club. Loss making before Ashley took over, there has repeatedly been the same sort of challenge in his flagship brand. Other retailers and other brands have been bought up when underperforming. Newcastle United were the same.
Having made and increased his fortune through floating his company on the Stock Market, it may be interesting to view the sale value from the Stock Market perspective, which is based on the accounts.
The next financial figures can be reported any time over the next couple of months and will cover last season. However, figures from the previous (2012-13) accounts show the club to be breaking level at an operational level. Trading profit was enhanced by player transfer activity, resulting in a £10m profit after amortisation, leading to a healthier cash position.
What we can expect for the next period is higher profit. Commercial deals include the sponsor on the front of the shirt. TV revenue is up by tens of millions. Although this could have been higher if the league challenge had been maintained, the sale of Cabaye adds further to profit levels. All told, with costs being contained, some analysts project profit at around the £50-60m level.
Looking ahead, there is further growth in TV income. Transfer speculation around Newcastle players suggests that the player trading model can be enhanced. Despite performance on the pitch, gates are consistently near capacity whilst commercial income has scope for development. The potential profit level for a mid-table team provides a fair degree of certainty.
Deloittes are renowned for their analysis of the football market. Recent suggestions as to club valuations are at a P/E ratio of 14-20. For the uninitiated, this means that the prospective profit should be multiplied by that factor.
That places a higher valuation on the club. Newcastle United, according to those criteria, is worth £700m to £1bn. Unless TV revenue collapses, commercial opportunities could make that higher. What does Ashley know that we don’t? Would he really sell for £250m?
Yes, it’s a great story. For some of us who love Newcastle United and want better than the image portrayed by the shirt sponsor, who want more than the ‘no capital outlay’ investment policy in the squad, we would love to believe that speculation is not without foundation. For the time being, he is likely to sell more players but ‘not at any price’.
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