It all adds up!

First of all let me say that High Finance bores the crap out of me. Exchange rates, the markets, shares – all that stuff. Probably because I never had enough money to need to worry about it. But lately I’ve taken an interest.

I had to smile the other day when I read about Mike Ashley’s “sponsorship” deal with Darren Clarke, Lee Westwood and David Howell. Basically he has bet them 2 million pounds that they can’t win one of golfs “Majors”. If they lose – which effectively they do until they actually win – they have to advertise Dunlop free of charge. If they win they still have to wear the name, but Ashley pays them £2 million for doing it.

You can take the Boy out of the Casino, but apparently you can’t take the Casino out of the Boy.

Well Clarkie just took the Open Championship at Sandwich and now Ashley is 2 million down. Even so – probably still a very cost effective advertising philosophy for Ashley. No doubt he’ll either try for double or quits, or best out of three.

I also have a little smile to myself when I hear everyone asking “what happened to the Carroll money?”

It’s not like Alan Pardew can just pop off down the Player’s Pick ‘N’ Mix and ask for “10 million quids worth of Fullbacks, 10 million of Midfielders and a couple of Strikers. Oh and can you chuck in half a pound of Sherbet Lemons while you’re on?”.

It doesn’t work like that. Even the most well funded teams still haven’t made all of their purchases yet, so who’s to say that Pardew isn’t going to spend another 10 or 15 million before the window closes in 6 weeks? Hell, we are so used to waiting until 11 pm on August 31st I don’t even know why we’re discussing transfers this early in the day.

But even if he does, aren’t our priorities a little off the mark here? What is the requirement? To go out and spend 35 million, or to build a competitive squad?

I take a look at the squad we have and I’m already excited. OK its not blood pumping pass me the tissues kind of excited, but between the new French Connection and those that no longer have broken limbs I’m quite looking forward to the new season. The icing would of course be another couple of quality signings, but let’s see what happens.

We also seem to have lost the plot even further with the incessant complaints about Ashley trying to take money out of the club. If the paperwork is correct Ashley has piled somewhere in the region of £130 million of his own cash into the club under the guise of an interest free loan.

Let’s get this straight – a business is supposed to make money, not cost you £25 million a year.

I have the odd beverage with a mate who is a Financial Advisor, and a reasonable one at that. He has managed to increase my personal stash by 20% over the last 12 months, but mine was specifically structured as a low risk portfolio, as I apparently fall into that category of investors known as AIMLESS (“Afraid I Might Lose Everything - Scared Shitless).

We had an interesting chat about the £130 million that Ashley has loaned the club. If Ashley were the type of person willing to take a risk - and as my mate put it “he bought a shagging football club, that puts him way off the right hand side of the risk scale” – then over 3 years he could easily expect to take that particular wad from £130 to maybe £300 million plus. Even if he wimped out and went with my AIMLESS plan he would make £100 million over the 3 years.

So if Ashley loans £130 million over 3 years, then gets it back interest free, he has potentially lost £170 million. If he leaves it there for 5 years he has lost a staggering £390 million, so you can see that an interest free loan repayable on sale of the club can best be described as a deal of the “bloody good” variety.

Lliambas has stated that none of the Carroll money will be taken out of the club, but at no time did anyone say that they will go out and buy £35 million worth of players.

Here’s an interesting fact. Four new players on £30,000 a week on 4 year contracts works out at £25 million. That is salaries alone with no transfer fees, no wage increases and no agents fees.

What has happened with us in the past is that we have bought players on tick, and paid them from our annual income (Gate money, Sponsorship, TV Money) as it comes in.

Ashley, in his efforts to get the club running like a proper business, and a viable one, has calculated costs with regard to the players from the outset and budgeted accordingly. This results in the “doon-the-road-dosh” being available for other things. It’s actually good business practice.

It means that in a few years time we may even be able to change our accounting system from the current NPM system (Negative Profit Model) to a more conventional one.

Here’s another interesting story to finish with. I read this a couple of days ago and can’t find the article again, so can’t give names and addresses but essentially its spot on-ish. Ashley floated Sports Direct on the market in 2007. Share prices immediately plummeted through a combination of bad PR and bad management.

He sacked top management and brought someone else in to run it, and then sacked them, because in his eyes they were not doing a good enough job. Between then and 2009/10 he made a number of “managerial adjustments”, finally focusing more of his time on the running of the business himself. Last year, bucking the global downturn, he made £200 million.

The story goes that as a reward for their hard work he has given his staff £90 million in shares and cash.
OK. Think Allardyce, Keegan, Kinnear, Hughton and change the £90 million to half a million for the St James' staff if we won the last game of the season, and that noise you hear should be that of a penny dropping.

Does this all sound a bit familiar?

Does this sound like NUFC?

Have we carried out enough managerial adjustment yet? He’s definitely running the ship himself.
This isn't Sports Direct. The journey to profit will be a longer one, but are we about to beat the economic downturn and stumble across a profit?

My Financial Advisor friend also has a few things to say about that £90 million business but I think that spending all his time handling other people’s money has just made Nigel a bit of a cynical old Hector.

Does Ashley know anything about football? I doubt it, but I put my money on him making money, and he won’t be doing that in the Championship.

Thanks to rchie Brand for submitting this article for us to read and discuss.