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Essential Reading – Self Sufficiency at Newcastle United

4 years ago

Despite everything we’ve been told about self sufficiency by those in charge at Newcastle, despite all the evidence to show where the money for heavy transfer investment in 15/16 is coming from, opinion formers are still crediting Mike Ashley with significant personal investment this summer.

Here is Lee Ryder in the Chronicle, telling readers that Ashley is “prepared to invest”:

‘Tottenham want more than £14million for Townsend and a loan deal with a view to a permanent arrangement has also been discussed.

However Ashley has made it clear to managing director Lee Charnley that he is prepared to invest.

Indeed, while Ashley took a back-seat at St James’ Park at the end of last season in terms of boardroom discussions, he is still the club’s main benefactor and wants to be a Premier League club next season when the £5billion TV deal for top flight club’s gets under way.’

Craig Hope, writing in the Daily Mail credits Ashley personally with putting up the funds spent so far:

‘Newcastle owner Mike Ashley put up £55m during the close-season, giving them the division’s second-highest net spend with £14.5m Holland midfielder Georginio Wijnaldum their marquee addition.’

And Simon Bird, writing for Newcastle’s Media Partner The Daily Mirror tells his readers the Ashley approach to investing almost one hundred million pounds in one season

 ‘Newcastle’s under investment over a couple of years means they are playing catch up. Ashley invests in his side from a position of relegation peril, and sells from a position of strength.’

All of this ignores the model in place at Newcastle United.  Talk of Ashley pumping in a hundred million pounds in a season has been scoffed at by the owner himself.  Remember his September 2008 statement

‘It has to be realised that if I put 100 million into the club year in year out then it would not be too long before I was cleaned out and a debt ridden Newcastle United would find itself in the position that faced Leeds United.

That is the nightmare for every fan. To love a club that overextends itself, that tries to spend what it can’t afford.

That will never happen to Newcastle when I am in charge.’

It’s a point that was reiterated by Derek Llambias when he outlined the need for Newcastle United to be self sustaining in his statement when the club was promoted in May 2010

‘The Board have therefore structured a five year plan in which the ultimate goal will be to ensure that the club is run at a “break even” manner by the year 2015/2016.’

And again by Llambias’s successor Lee Charnley when he was appointed chief executive in April 2014 and specified that the club would live within it’s means

‘We will continue to operate in a financially responsible manner and live within our means. This Club is financially strong and there is money to spend if the deal is right and we are confident a player can add quality to the squad’.

Rather than a change in policy, the spending this season should be seen as nothing more than a continuation of this policy.  The club spends what it earns from TV, matchday and commercial income and nothing  more.  In six out of eight seasons we have accounts available for under Ashley, the club has spent exactly as much as it was able to under this policy (or a little more until the club climbed out of the championship). Only twice in 8 years has the club fallen significantly short of that.  In 2011 when Andy Carroll was sold and in 2014 Yohan Cabaye.  The club did not rush to re-spend these two windfalls immediately.

This led to cash reserves of £34.1m being in the bank come June 2014, while the club already had (and still has) the seventh largest revenue in the league.

Newcastle United are not minnows relying on Mike Ashley to put his hand in his pocket to avoid relegation. They are Premier league heavyweights in comparison to the majority of other clubs and can afford this level of investment year on year, no matter who the owner is.

Rather than Mike Ashley benevolently handing the club a portion of his wealth to avoid relegation, he’s persisting with the same policy of the club wiping it’s own nose.

When the 2015 and 2016 accounts come out we’ll not be shown to have jeopardised financial stability or extended the loans provided by Ashley.  Rather we’ll see that we have continued to spend what we can afford.

Rather than current spending being a spree over one, two or three windows as McClaren has suggested, it will be the benchmark going forward and only grow with the next TV deal.

There is no evidence that Mike Ashley has made any further investment in Newcastle United since the club was in the championship back in 2010.  In fact, we know for a fact that he has taken money out since then.

Ashley took £11m OUT of the club to repay a fraction of his earlier loans. This was stated in the accounts from 2012 when the amount owed to Ashley was reduced from £140 to £129m

‘Mr MJW Ashley also continued to provide loan facilities to the Group during the year. The total balance outstanding at 30 June 2012 was £129.0million (2011 – £140.0million). The maximum outstanding in the year was £140.0 million (2011 – £140.0million). No interest was payable on the loan for either the current or the prior year.’

Wetting his beak with some of that Carroll money no doubt.

For me it’s important that the distinction is made between how the club continues to be funded.

Supporters should not be given the impression that the club needs or benefits from Ashley’s ongoing financial support to maintain Premier League status and potential investors should not be dissuaded from looking at the club because it’s perceived as a drain on an owner’s resources.

Thanks to Chris Holt for another excellent piece and you can visit his blog HERE, plus you can follow him on Twitter @MikeAshleyLies


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