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Opinion

Reading between the lines of the Newcastle United accounts

5 years ago
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I was impressed with the matter of fact way the club released information from the 15/16 Newcastle United accounts.  I had got used to hyperbole, spin and selective figures in previous years, but the club statement this time largely let the numbers do the talking, pointed to what was good but didn’t sugarcoat what was bad.

There were some exceptions though, some areas that deserve further examination, as reading between the lines provides more context than the surface sheen of their brief article.  But largely, my opinion was it was much improved in a PR sense.

Before I go into the details, I will say that following the last relegation in 08/09 Newcastle were restructured to be able to cope with relegation.  Ashley had to inject a £29m personal loan the following season in the championship and that was after cutting costs across the board.  These accounts show that the restructuring was successful.  You only have to look at Aston Villa and the financial debacle currently engulfing Sunderland to see that this prudent approach can pay dividends for a club that has been relegated.

Many will see this prudency and the resulting accounts as a ringing endorsement of the financial job that’s been done.  Others would ask if setting the club up to be able to effectively yo-yo is really something that supporters should celebrate?

With that in mind, here’s the few main points of interest to me which I’ve not seen covered elsewhere

Debt increased £15m to £144m

While debt was reported as £129m, that was the figure at the end of the accounting period, which was June 2016, almost a year ago.  The club statement added a further update that in December 2016 £33m more was loaned to the club.

The complexity is that £18m of it was used to pay off some of the £129m debt already on the books (the remainder of the £29m personal loan mentioned above) and the club only kept the remaining £15m.  To be clear, £18m of the £33m was paid by Ashley to Ashley, from his St James’ Holdings company and to himself personally and taken off the club debt.

The remaining £15m should be the headline cost of relegation.  Losses in the championship might also be covered by income from player sales or from an extended overdraft, but in terms of the growth in gross debt, it now sits at £144m.  A number not mentioned by the club or elsewhere.

There was no requirement for the club to announce this.  The loan facility had already been publicised when it was submitted to companies house in December 2016.

My opinion is that the conscious decision to include this post accounting period information was to counter the announcement that the club turned a profit in the year it was relegated.

Relegating a club in profit doesn’t look good, so highlighting the personal cost to Ashley serves to make him look like the victim of the club he’s lumbered with, rather than the club and fans being the victim of the owner they’re lumbered with.  An owner who has more than doubled club debt since arriving.

The Wage Increase is vastly overstated

Three times the club statement pointed at increased wages to express dissatisfaction with the relegation that resulted.  This was disingenuous.

Wages in 2015 were only £3.7m more than they had been seven years earlier.  To emphasise wage growth from such a low base gives a false impression.  Wages were actually down from 2014.  Here’s how Newcastle’s 2016 wage bill compares with other clubs that have released accounts so far.  They had the lowest I could find, and also the lowest percentage wage growth over the 10 years Ashley has been at Newcastle.

The club has made almost £100m Profit in the last 6 years

The fact that the club has been profitable 6 years running was included in the release.  Exactly how profitable was not.  The £4.6m profit for 15/16 means that in the 6 years before being relegated the club turned a £99.8m profit.

This should not be taken as Ashley pocketing large sums of money.  Every year that the club makes a profit it tends to then re-invest that money in new players.  This is exactly what we envisage a self sufficient club to be.  The alarming take away should not be that anyone is profiting from failure at the club, but that so much has been spent on achieving failure.

That’s not to say Ashley is not profiting. The Strawberry Place property development will personally profit Ashley rather than the club that owned the land, but that’s been well covered elsewhere and should outrage every supporter for it’s calculated shifting of wealth.

What’s revealed by this level of profit is the rank incompetence of the people empowered to reinvest that money and how singularly they have failed to build a squad with it.

You can follow the author on Twitter @bigchrisholt

(All contributions from Newcastle fans welcome, send articles (as well as ideas/suggestions) to [email protected])

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