Newcastle United £73.4m losses – A big fat Red Herring
Newcastle United published their latest financial results on Thursday.
These were the accounts for last season, the 12 months up to 30 June 2023.
These 2022/23 accounts were the first ones covering a season where the Saudi Arabia PIF led consortium had been in charge for a all of the 12 months.
The previous accounts (12 months to end of June 2022) the new owners had been in charge for less than nine of those twelve months, plus of course the basics of that season, particularly when it comes to generating cash, had been largely dictated by the previous NUFC owner.
Anyway, a lot of media coverage and debate since these accounts have been made public by the club. Some of it enlightening, much of it not so. Indeed, lazy and embarrassing are two words that spring to mind, with a lot of what I have seen from journalists.
Headlines / stories along the lines of ‘Newcastle forced to sell players due to £73m losses’ and similar.
We can’t all be experts (swots!) on amortisation and other riveting accountancy stuff and so many / most of us do rely on those in the media to inform and enlighten us, something which is sadly, becoming increasingly rare. That is, the ability and/or intention of these journalists / media to keep us right on football finance and so forth. Especially with so many agendas flying around when they cover Newcastle United.
The truth is, it is a big fat Red Herring for anybody to claim that Newcastle United have to sell anybody because of these £73m losses that are showing in the latest accounts. Or indeed the losses overall at the club, since the change of ownership.
The reality is that Newcastle United could CHOOSE to sell players, which could then give them massive leeway to spend far more on new signings, over and above any transfer fee they might get from selling certain players. FFP does affect Newcastle United, it affects every club, however, as the NUFC owners are playing catch up on and especially off the pitch, then it is more challenging for Newcastle than the usual suspects.
The ‘six’ still have higher revenues than Newcastle United, some of them still massively so. However, NUFC are making progress and getting far closer, to some of them anyway.
As I say, the idea that these Newcastle United owners could be ‘forced’ to sell any quality player is laughable.
What is even more laughable, is the complete failure to even mention that the only reason Newcastle United have such high quality players that other clubs would willingly pay fortunes for, is due to the new ownership and key personnel they have since employed, especially Eddie Howe and Dan Ashworth.
One of the many serious problems that the new NUFC regime had, was that the club had so few assets worth anything. The squad largely made up of players worth nothing, or even worse, less than nothing. As in, Newcastle United needing to get many players out of the club because they weren’t of the required level and so much in wages paid out on these players. Meaning effectively that deals would have to be done to get them off the books, via Newcastle United subsidising / paying up wages etc etc. With minimal / zero transfer fees coming in for them.
Of the players at the club re-takeover, small fees have been banked from the sale of players such as Woodman and Darlow, a little more from Shelvey leaving, with ASM the only real significant pre-takeover asset that has generated anything like a deal of substance in terms of both cash and especially FFP help. That ASM sale though will be in this current season’s accounts when published next year, as his sale was key to helping Eddie Howe bring in the likes of Livramento and Barnes, who eventually followed Tonali through the door this past summer.
These 2022/23 Newcastle United accounts cover only up 30 June 2023 and they showed this £73.4m figure of losses.
However, there are losses and there are… losses.
The way some journalists are putting it across, Newcastle United are now having to sell players because the club has lost £73.4m. As though that loss of money meant cash had to be desperately generated. This though isn’t the case at all.
These accounts are actually massively positive. It isn’t an Everton situation, where the scouse mackems went out and spent massive amounts of money on assets (players) who very quickly became worthless, or worse… then went and spent further fortunes on more players due to their buys proving so poor, these further signings then proving just as bad or worse, then repeat again.
If a business makes losses BUT the assets they use the cash to buy, end up of far higher value than the losses, then it is a real success story. After a takeover, businesses may need to invest fortunes on raw materials, stock, or whatever, but then that can in many cases end up generating far more cash than the initial investment cost.
Specifically with football, it works in a number of ways, when you invest in assets. Those assets (Eddie Howe, Dan Ashworth etc as well as players signed) helping you to generate far more cash via their contribution to performance on the pitch, more money generated through league position, qualifying for Champions League, getting to cup finals and so on. Plus their values going up as players, in terms of transfer valuation.
Amongst the players bought during the 2022/23 season accountancy period, were the likes of Alexander Isak, Sven Botman and Anthony Gordon. All three of these have massively increased in value and the sale of any one of the trio would now cover those £73.4m losses, in my opinion.
The same with Bruno Guimaraes of course who arrived during the previous season.
This is before we get to the countless inherited players that Eddie Howe has added £££ value to.
Plus of course the homegrown talent that has been so carefully looked after and developed. The likes of Lewis Miley, Sean Longstaff and Elliot Anderson, all of them big / massive Newcastle United assets now.
The Newcastle United owners and their key personnel have made it patently clear that the overwhelming majority of money spent on players, will be spent on young / younger players with the intention of developing them to become even better players AND ever bigger assets.
The only new outfield player bought in since the initial relegation fighting January 2022 window who was aged older than 25 when bought, was 25 year old Harvey Barnes.
When you combine this information with then the quite obvious FFP limitations that were always going to be a major challenge for Newcastle United to deal with in the early years after Mike Ashley, it then illuminates even further just how ludicrous the countless journalists are. Who persist in making up transfer stories claiming Newcastle United are trying to buy numerous older ‘name’ players who would cost massive signing on fees and wages, yet be instantly a depreciating asset. In other words, never even worth ever again the transfer fee that was paid for them, never mind any chance of these signings growing in value.
Patience is the key word.
Especially with Eddie Howe and Dan Ashworth at the heart of thing, the Newcastle United owners and the club hierarchy overall are clearly moving things in the right direction.
You just have to accept that moving on from a decade and a half of Mike Ashley, this is the equivalent of turning a massive oil tanker around, not a nifty speedboat changing direction.
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