Mike Ashley and curious case of these missing millions of revenue at Newcastle United
In light of an excellent article (Comment: Mike Ashley promises in 2013 – Newcastle United and Leicester City the reality) recently by Mark Jensen and figures released by the equally excellent financial blogger Swiss Ramble about the amount that is spent on capital infrastructure by each club (this is basically what is spent on buildings etc), it was no surprise to find out who was bottom of the league in the findings.
In the recent article Swiss Ramble stated that NUFC had invested only £7m in infrastructure from 2010 to 2020. At this point I’m not going to compare figures with other clubs, that will come later.
About five years ago Swiss Ramble did a very similar table / article, in that he stated NUFC had invested £10m on infrastructure. Now, I think there is possibly some crossover in the figures as the latter figure may overlap with the earlier figure. But, for the purposes of this article we will presume there is no overlap. This means that since 2007, NUFC has spent £17m on the infrastructure, at the very most.
If we take it as read that the figures produced by Swiss Ramble are correct, which in light of his experience, it is pretty much on the nail. It means that Newcastle United has only spent, at the most, an average of £1.21m per year in the 14 years we have been owned by Mike Ashley, it’s not a lot in any eyes and quite measly, as it only equates to basic maintenance.
This is that latest Swiss Ramble table, comparing the various Premier League clubs in terms of invest in infrastructure from 2010 onwards:
It is even more galling when you consider that the stadium and the training ground were constructed before Mike Ashley bought the club and that a large TV and signage are the only obvious investments.
There is no sign of this investment improving unless a takeover is forthcoming, as recently Lee Charnley stated he didn’t see the value in a new training ground. In the meantime, NUFC get further and further behind their rivals, until it does become an issue of players refusing to sign for the club as they don’t see it competing.
There is a saying in business and in sport, that if you don’t invest and move forward you will go backwards; you can’t even stay still as your competitors will overtake you with ease.
This brings me to the second figure I want to look at.
This time I will use 2 other clubs as a comparison.
Tottenham, who are a comparatively sized club and Brighton, whom I feel are a smaller club but Derek Llambias said NUFC couldn’t afford to compete with for player.
The figure in question that caught my eye was that of the revenue generated by the club, not including any generated by either TV or European competition, I know NUFC aren’t keen on the latter. The Premier League negotiate the prize money and revenue for all clubs in the Premier League when it comes to TV rights, the same as in the European competitions, where UEFA hold sway. This leaves the clubs with shirt and stadium advertising and any other incomes that the clubs can generate for themselves.
The first accounts published around the time of the takeover stated that this income was £23.5m, sounds a lot doesn’t it. If we look at Tottenham from the same year, the figure is £26.4m, this isn’t too distant from NUFC. Brighton who were in a lower tier at the time came in at £0.9m, as expected a lot lower.
Now, if we look at the figures produced by the three clubs in 2019 prior to the pandemic.
The figure for NUFC is £26.2m, for Tottenham it is £161.5m and for Brighton £9.5m (again not big but steady growth for a club with the size of the fan base). It means that NUFC have improved their revenue by £2.7m or £220k per year. Tottenham on the other hand have increased by £135.3m or £11.27m per year, almost half what NUFC have done in one year. Brighton, who had a lower starting point have increased in the same time by £8.6m or £710k per year, also a more significant growth than NUFC. It is not so much a case of looking at where the money goes but more looking at why it isn’t coming in.
In looking at these figures, some say that Newcastle United is a well-run club, they also say that Mike Ashley doesn’t take money out of the club. I would disagree with the first and argue with the second. Yes, he doesn’t take the money directly out of the clubs in the form of a salary or a dividend. But, anyone who has run a business and I’ve run a few, knows that you don’t have to take money out of a business directly, it can be indirectly or in goodwill, the net result is the same. A slow painful death of the business.
A cursory glance around St James Park when you enter the ground tells its own story. Look at other grounds and you will see a plethora of advertising, most of the advertising in SJP is either what they are obliged to do for the Premier League or EFL when they have been in the championship. Or it is for The Fraser Group / Sports Direct and all their associated brands. As the latter didn’t pay for any advertising for the first 10 years of MA’s ownership it’s not difficult to see why the revenue hasn’t increased.
If you add the fact that the SD brand is toxic and the higher profile companies that may have advertised shy away from Newcastle United and SD. Now you would think that as SD profits in the same time (they were floated the same years as MA bought NUFC) would give a handsome dividend during this time to appease those who bought into the company when it was floated. You’d be wrong, for the last few years they have not paid out a dividend, despite huge profits. This is due to a corporate decision at SD to buy back shares, Mike Ashley owns 64% of SD shares. It would mean that he is effectively taking more and more control of SD (as SD buy up shares, it means the total number of shares decreases, so Ashley’s percentage share of the ownership keeps going up), it is well-known that he isn’t a great fan of AGMs.
It is also questionable the strategy at Newcastle United to close club shops. Is it a policy to drive the customers who would have bought solely in those shops to instead shop in SD shops? If this is the case then it further diminishes what the club can achieve in commercial terms and is it why the takeovers have repeatedly failed, not on price but on the caveats that are in the purchase from Mike Ashley?
I personally feel that the club is being systematically asset stripped from the inside, with the help of those who support Mike Ashley.
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