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Football finance expert: Newcastle accounts show ‘real’ loss of £20m not £90m – Compare to £116m profits last 4 years

3 years ago
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The full 2016/17 Newcastle United Accounts have now been made public.

Last Friday saw the club present their headline figures from these 2016/17 accounts, ahead of them being made public.

The club clearly wanted to paint as bleak a picture as possible, with many/most Newcastle fans believing it to be an attempt by Mike Ashley, to push an agenda to try and show why this summer’s transfer budget should be far lower than both supporters and Rafa Benitez would be expecting.

They made much of the ‘fact’ that Newcastle United had ‘lost’ £90m in their Championship season.

Sure enough, pretty much all of the media slavishly followed the club’s line and repeated that figure, with many then using that £90m ‘loss’ in claiming that this then reasonably means why transfer budget expectations should be reined back.

However, when you looked into the various basic figures that the club provided last Friday, the picture didn’t look half as bleak as was being presented.

They did show an accountancy loss of £90m but in terms of actual cash, Mike Ashley had only had to put in an extra £15m to help get through this Championship season, plus the bank balance was showing less than it had done at the start of the season.

So in terms of actual money in and out, it appeared to be £25m had been the real hit on the club that season in terms of cash.

Now with the full 2016/17 Newcastle United Accounts able to be seen online at Companies House, football finance expert Kieran Maguire has done a great analysis of all the figures.

Kevin Maguire lectures in football finance at Liverpool University and also has his own Price Of Football website.

After poring over the various numbers in the NUFC accounts he has declared:

“Have crunched more numbers…

“Newcastle United EBITDA loss, used by analysts and excludes non-cash and one off items, is £19.8m, much less than quoted in press release.

“EBITDA profits £116m in previous 4 yrs, so don’t expect MA to be seen selling the Big Issue just yet.”

So in terms of the real hit on the club, the £19.8m figure Kieran Maguire has come up with, is very similar to the £25m cash figure that supported the club through the season in the second tier.

Getting Technical but easy to understand:

We don’t have to suddenly all become accountants, it is quite simple what Kevin Maguire is getting at.

EBITDA stands for earnings before interest, taxes, depreciation, and amortization, the definition of it being:

‘EBITDA is essentially net income with interest, taxes, depreciation and amortization added back to it. EBITDA can be used to analyze and compare profitability among companies and industries as it eliminates the effects of financing and accounting decisions.’

So basically, the EBITDA figure is the best guide to show how well a football club (or any other business) has done financially.

As Maguire points out, the club may have had a negative £19.8m figure for 2016/17 but in the previous four seasons, Newcastle United showed a total of £116m in EBITDA profits.

Anybody who thought that NUFC was in dire financial straits should think again, yes a season in the Championship has been a setback, but no reason why that should mean there isn’t significant strengthening of the squad and backing to Rafa Benitez this summer.

Previously NUFC from Kieran Maguire – The Mag 23 November 2017:

Mike Ashley is hopefully in the final stages of his time owning Newcastle United.

A disastrous decade of low/no ambition has seen two relegations and a number of near misses.

Newcastle reaching safety only on the very final day of the 2014/15 season when winning at home to West Ham, whilst the 2012/13 campaign saw Newcastle finally safe when beating QPR in their last away match of that season.

A football finance expert has now declared that it is ‘amazing’  that there weren’t more relegations in the Mike Ashley era, considering the lack of investment in the squad.

Kevin Maguire lectures in football finance at Liverpool University and also has his own Price Of Football website.

Maguire has revealed that between 2008 and 2015 there was an average net (players bought less players sold) spend of only £700,000 per season.

This happening at a time when the Premier League TV cash was rising dramatically.

It always felt/feels like Mike Ashley is living from season to season and these figures (see below) back up that perception.

Yet again he has gambled this season, refusing Rafa Benitez a penny to spend in January 2016, then a net spend of only £11.5m this summer (Brighton and Huddersfield both had net spends of over £40m), despite the club reporting that Rafa had earned Newcastle United a £40m profit on transfers in summer 2016.

Kieran Maguire;

“Between 2008 and 2015 Mike Ashley spent a net £700k  (on average) a season on players.

“It’s amazing that Newcastle United survived as long as they did in the Premier League.”

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