How Mike Ashley slashing £13m from wage bill has led to Newcastle relegation
Newcastle United somehow managed to slash their wage bill by some £13m in the space of a single year.
Wednesday morning saw the club release the headline figures for the latest accounts, covering last season (the accounts for the year up to 30 June 2105 see them HERE).
Some interesting stuff but in amongst the information, Newcastle United say they reduced the wage bill from 60.3% of the club’s turnover in the 2013/14 season, to 50.5% of turnover in 2014/15 (see below).
This kind of improvement in the wages to turnover ratio would normally come hand in hand with a significant rise in turnover…but Newcastle’s turnover actually FELL in this period – only by £0.9m but still a fall and not a rise.
What the drop in wages actually amounts to in cash, is around £13m.
NUFC having a wage bill of around £78m (60.3% of £129.7m) in 2013/14 then…
A wage bill of around £65m (50.5% of £128.8m) in 2014/15.
Interestingly, if you look at the ‘key financial performance indicators’ above, Newcastle United’s increase in profits after tax is…£13.7m, almost exactly the amount saved in wages.
With such a significant difference in the wage bills, I think it is fair to say that there were orders above from Mike Ashley to make sure it happened – it didn’t happen by accident.
So how did this change come about?
Well we need to look at the players employed and on the wage bill by NUFC in the 2013/14 season as compared to those on the wage bill in 2014/15.
So who left the club and the wage bill and who was added:
Players who left Newcastle United
(Jan 2014) Yohan Cabaye, (Summer 2014) Loic Remy, Luuk de Jong, Dan Gosling, Shola Ameobi, Mathieu Debuchy, Sylvain Marveaux (out on loan), Hatem Ben Arfa (out on loan then contract ended by mutual agreement), Mapou Yanga-Mbiwa (Out on loan then permanent deal), Davide Santon (out on loan Jan 2015)
Players who arrived at the club and onto the wage bill:
(Summer 2014) Jonas Gutierrez and Mehdi Abeid (Back from loan spells), Ayoze Perez, Jack Colback, Emmanuel Riviere, Daryl Janmaat, Remy Cabella, Siem de Jong, Facundo Ferreyra
Nothing wrong with trying to get the wage bill down BUT if we look at performance on the pitch then we can see what a dangerous game Mike Ashley played.
At the same time as the wage bill was cut by £13m, the club went from finishing 10th in 2013/14 with 49 points (would have been higher if hadn’t sold Yohan Cabaye in Jan 2014 and bought no replacement), to only surviving on the final day of the 2014/15 season.
Maybe the very final step too far in Mike Ashley slashing the wage bill/costs to increase profit, was when Hatem Ben Arfa, Mapou Yanga Mbiwa and Davide Santon were all allowed to leave after summer 2014 and not one replacement was brought in – the club’s owner and his minions having their complacency almost punished by relegation.
Not a major leap at all to think that the savage cost cutting of 2014/15 has laid the foundations for this season’s almost now certain relegation.
A well run business…don’t make me laugh.
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