Date: 14th August 2011 at 3:48pm
Written by:

Newcastle chairman Mike AshleyRight, here comes the wanted “explanation” for the £35 million from the sale of Andy Carroll. Before I start, I want you to keep a few things in mind. These are the numbers from 2008/09 and 2009/10. Meaning we won’t see the finances for 2010/11 until May/June next year (2012). However, this sets up the earlier years, including pre-relegation and the year we were in the Championship. It should provide the foundations for calculating at least our current wage structure as far as we can guess. Guess being the important word here, as NUFC doesn’t release statements on individual fees received, or given from player transfers or wages. All we have is speculation from the press. This took me quite a while to gather information from, but I see it as vital, that before we start pointing fingers at Ashley, we should at least have a foundation based on facts. And here they are.

In summary what Shepherd left was a club that was losing over £30m a year, had debts of £70m, had no assets they could borrow more money against, and had a set of players on long, lucrative contracts. Ashley can get rid of the debt but the £30m annual losses with over paid players will take longer to sort out.

This has proven to be the case.

Upon his takeover, Ashley inherited a mortgage on the stadium: meaning they didn’t actually fully own their own stadium, and had a further cost of £4.5 million a year in mortgage payments. Once the club changed hands however, the mortgage providers got cold feet and demanded the remaining 8-9 years of payments in a single payment that Ashley had to cough up for. This was the first in a series of bills that landed at Ashley’s feet that he had to cover to keep the club afloat.

The wages have gone up from £63.4m to roughly £70m. If the first team squad is made up of say 25 players then they would all be getting closer to £3m each rather than just £2m each. A frightening figure, considering the on-field performances.

The Sky money has gone up dramatically, but the gate receipts and merchandise numbers are going the other way. The 2008 gate receipts were lower than those in 2007 despite the average league attendance going up. The 2009 gate receipts would likely be down 10% on 2008. The club shop sales would also be down due to fan boycotts.

Naturally, with a backdrop of shaky revenues we of course have massive wage growth. Wages managed to grow by over 40% over the period 04-05 to 08-09, with the club relegated with a wage bill of £71million, one of the highest in the Premier League. That is only bested by high and increasing amortization: a result of significant transfer spending and the most recent amortization figure of just under £20 million is higher than most sides, though lower than the top four average and the big spenders such as City and Spurs.

All this adds up to turnover declining compared to its 04-05 figure, after a drop of around 15% between 07-08 and 08-09. Operating losses of £9m, £11m, £24m and £25m from 04-05 to 07-08 point to fundamental concerns at the heart of the NUFC business model.  Ashley has had to dip into his own pocket on numerous occasions to pay off creditors to avoid administration proceedings and such a situation cannot go on forever.

Despite the new TV deal boosting revenues in the middle of the period,  declining league finishes have meant that Newcastle’s TV money hasn’t grown as much over the period as would be expected. This was because a lower league position only warrants a smaller percentage of the money over the period, but if the deal itself increases (as it did), Newcastle’s TV money will still increase.