It all adds up!

Mike Ashley: Businessman extraordinaire?
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.

About toonsy

A lifelong Newcastle fan and current webmaster of this very 'blog who has the sole aim of creating a place by Newcastle United fans, for Newcastle United fans.

205 thoughts on “It all adds up!

  1. I think me cuz has mentioned it to him anyway, he reckons ya just need to tip up for training but I’ll get him to get in touch with ya first.


  2. alreet RT cheers, last time I just turned up for a traing sessions, I got told the squad was full and felt a right tw@t 🙄 😆


  3. good article, with a good viewpoint but if we add salaries for new players, shouldnt we deduct salaries for players left (carrol, nolan, ireland, campbell),
    plus what about all the free advertising sports direct get, is anyone at the club actually trying to sell advertising


  4. aye, but I got told before we trained, after he said, if the squad wasnt full, you would have probably got in, so neerrr 😆


  5. strangely this article covers just about everything ive been saying to the doom mongers for months. it is all true the money from cazza is paying up front if you will the wages of our new players. more money is being invested and the other income will then be true to fuel advance wage plans and as such, it too will, mean although it will be depleted over time it will still be in the bank but to an extent where intrest is earned as opposed to the reverse which has been our policy previously.. to borrow to pay and then have to pay interest on it as well meaning we fork out even more for our wages etc.. equal out wages no longer being payed all you like but we dont earn enough to do that and our wage bill was too much to start with and had to come down



    And what’s the likelihood of those players still being here in 3-4 years if they are as good as we are told?
    What happens to those wages put aside then? Back into the kitty? Nah as everyone has forgot by then….

    not me though…I’ll remember Dekka. You mark my words


  7. @155 unfortunately our stadiums advertisement hardwares been outdated for years. a significant investment is being made to introduce the latest electrical hordings and other stuff. this though will have to be payed for however and i bet its also from cazzas money however it will significantly increase this revenue stream going forward


  8. @157 all players have their price. its up to the team to secure the potential and level of football they want if one or two shine and the rest fail then it happens at all clubs, the best players will request to leave and that isnt the owners fault directly. or am i missing something here >.<


  9. to those who say its not a business its football, you must be 100 years old as its been a business for a long time. in the past however the owners made significant amounts of money whilst players earned hardly any… now its got to be run as a business to stay alive.. finishing in the league doesnt guarentee a clubs survival any more


  10. I totally understand what Ashley is trying to do, and I obviously don’t want the club to go bust, and it would seem Ashley is the man to run it the right way especially with the new rules about clubs spending only what they make coming in soon.

    I just wish Liambias and co weren’t such a PR disaster, and I also wish they would stop spinning their words and just say it how it is.

    Cut out the lies, and all would be okay.


  11. I meant to say that was a good article too, well written and entertaining 😉


  12. Joppa,

    Think you missed my point mate.

    We have put money aside (some of the transfer money received for a certain player) to pay these new players wages.

    As the article quite rightly points out – “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 then happens when these players are sold after 2 years for a profit? (Hypothetically speaking – yet likely if they have a good seasn and we continue to lack ambition)
    Will the club say, right then that’s 12.5 million in the kitty we aren’t now going to spend on his wages, plus we have sold him for millions, shall we buy some quality players? Doubt it 😕


  13. Good article. I would love to see a few more players come in, but don’t care i they are cheap of ‘free’ just as long as they can give a good game.

    Along the lines of an article from the other week, if Ashley is taken some cash back from what he has put in, and i don’t balme him really, fair enough. just wish they would say, we have to pay off some of the money owed to the owner and other cash spent on the club rather than keeping stum about it. If that was said from the start, think many would accept it and just hope we can do better than the season before.


  14. Sidekick/bobby Either of use lurking on here? What was the answer to the contract question, i’m being thick/lazy/blind and can’t find it.


  15. @163 – moreno. i cant speculate about what will happen in a few years. i understand your concern within the question just not why ask now mate.

    tbh tho. put it this way.. if we have the money now for salaries in banks making bacs payements whenever. if a play leaves the wage pile not payed out to the player will still be in the kitty. i suspect what llambias and ashley will do is take it all out and start lighting cigars with it.


  16. Joppa,

    Then they repeat the process over and over, meaning our beloved club is a feeder club, happy to sit mid table and turn over profit each year.

    Yawn. Boring. I have never been one to be happy with mediocrity and it pains me that my club always will be under these lot.


  17. duno where anyone got the idea we are a feeder club… havent been since the 80s and even then it was the vast amoiunts of money being thrown at the players. 1 sale ( cazza ) does a feeder club make not…

    ****ed if i know why i put it like that mate. but seriously carroll was worth about 6 million tops… if i had a an helicopter id have stuck him on it as well

    lol we arent a feeder club and to guess if we will sell players in 2 years is the road to madness my friend.. let the future take care of its self and lets see what they are doing now as that is the only indication we can use to make informed decisions rather than wild guess work 😀


  18. however… i do also think shola is a fantastic footballer so its possible thats i am ****ing insane


  19. For the love of god, please stop referring to salaries as if they are financed by f’ing transfer fees! Our annual turnover is more than enough to cover our wage bill, for christ’s sake it was almost enough while we were in the Championship!


  20. Moreno – But historically all we are is a mid table club that doesn’t won anything. Our average finish in the Premier League is mid table. We’ve finished in the bottom half mire often than we’ve finished in the top half. Look at our entire history and it ain’t much better.

    It makes me giggle when people talk about “never winning anything under Ashley”. Now unless I missed a golden patch then the last trophy we won was something like 43 years ago. It ain’t a new thing, yet people seem to believe that our lack of trophies after all those years would somehow end if it wasn’t for Mike Ashley 🙄


  21. Just an after thought – ref Ashleys running of the club.
    I don’t doubt for a minute that Ashley is putting the club on a sound financial footing to make it an attractive proposition for a future sale. Its not easy to sell a sinking ship and none of us likes to lose money. But to be honest i dont care about that. Thats a bit like saying a playeris only playing well every week in the hope that he’ll get a transfer to Real Madrid.
    As for M’s comment, sign of the times mate. Salaries are now included as a running cost and catered for, wherever possible, from the transfer fee – even if its only a weak excuse for not spending money.
    Personally I think it seems like an accounting wheeze.
    They are saying they are setting aside 40 K a week from the transfer fee, but lets not forget that they are also saving 40K a week because they are not paying Nolan any more.


  22. Glad to see the fantasists are getting a second wind.

    Wages should be accounted for from yearly turnover.
    Saying they are taking the money from incoming transfer funds is a ridiculous state of affairs.
    We all know Cabaye will probably leave next year (he was promised we were trying for Europe; we were promised we were trying for 10th) but let’s imagine NO players leave in the next four or five years. Does that mean we have to let them all go because we won’t have any money to pay their wages when their contracts are up?
    Of course not.
    If Ashley is half as shrewd as some of you think he is there is no way on earth he would allow the wage bill to be reliant on us being able to sell people for £35m.


  23. Pootle…agree with some of what you say but where were we promised we were trying for 10th? you won’t find it because we weren’t. I believe it was a top tenth finish which is from 1st to 10th inclusive 😉


  24. Toonsy @ 173. I think we are 8th in the Premier League points standings. Can’t remember where I got that from. And let’s face it, we’ve been relatively hot in the PL

    Our average position over my lifetime is 16th (counting the 2nd division from the bottom of the first – ie if you win div 2 it is thought of as coming 23rd – that is, when the 1st div … well, you get the picture).

    So yes, we are a mid-table club historically. Eeee, try tellin’ that to t’kids of t’dae, like …


  25. Toonsy, at least when Keegan got us promoted in the 90’s we were competitive. We showed some ambition. We didn’t win anything but at least we were trying.

    Then after Keegan left came an era of profligate waste by Shepherd. Several poor managerial appointments and money wasted on big name players past their sell by dates.

    Nobody wants to return to that. But all the Ashley lovers don’t seem to be able to see that there is a difference between spending money wisely on decent players and wasting it hand-over-fist like Shepherd did on Kluivert and Luque etc.

    Carr seems to has a decent eye for talent but there is a limited amount of scope if the only players we are prepared to get are around a max of £4m in fees and/or 30-40k in wages. It will be especially difficult to get a decent striker for that.

    I hope Ashley comes to his senses before the window closes. We need another good quality striker. We could also do with a RW and fullbacks. We have the potential for a good season with a few additions.

    Unfortunately it appears that Ashley may actually be quite happy with mid to lower table mediocrity as long as he can buy players cheap and sell them on for significant profit.


  26. What would have happened this summer if we had`nt sold Andy Carroll it makes the mind boggle! We are now a selling club who will never be able to be able to build up a strong squad because as soon as players show quality one of the top clubs will sign them. In order to buy we must sell players is this the recipe for success? Well it is if you can buy a Tiote every time but that is not going to happen. You have to speculate big money on the odd player each season to improve. We have a crowd of 52000 plus and our income is substantial when compared to a lot of clubs. I think Ashley is pitching his objectives too low when you look at the potential of the club he is dealing with.


  27. Yeah richietoon, I know.
    However saying you are trying for Europe (Cabaye mentioned it in an interview) is much different to saying you are trying for 10th or above.

    With a few more QUALITY players in I think we could realistically try for seventh, or maybe even sixth or maybe have a serious go at a cup. As it stands we have a pretty decent first 11 except for Simpson (providing, of course, that the freebies live up to the hype).

    As it is though we lack quality in depth. We may well finish 10th if the players with injury question marks stay fit, based on the current squad but without improving the squad I think European places might as well be lightyears away.


  28. In further answer to Pootle above, it is in deed a ridiculous state of affairs , but thats obviously what they are doing. Recent comments from other clubs would suggest financially they look at a transfer as a long term package over the duration of the contract and cost it accordingly.

    Essentially turnover, transfer fees, sponsorship, etc all goes into the same pot so does it really matter? All we are doing here is rearranging the deck chairs.

    I suspect Ashley is playing a few accounting games by accounting for, but not actually spending the full (or anywhere near) 35m at this point in time. Unfortunately thats what businessmen do these days.


  29. We are not going for the win, or even making a charge for Europe.

    Personally I would ignore all that crap.

    Realistically we are looking at 2 or 3 years Prem consolidation, using guaranteed TV income to get the finances sorted and then maybe the signings will be a bit more ambitious.
    You never know – maybe Carr’s recommendations can lead to a better season than last year. All I want to see is a bit of creativity. My god we’ve been dire at times.
    I’m not an Ashley supporter as such, but if I didn’t’ look at it like this, there’s days I wouldn’t even bother getting out of bed.


  30. Eh, of course it matters.

    If wages are contained with in a percentage of the normal annual turnover then there is no need whatsoever to use money accrued from transfers to pay wages. That money can then be used to buy players, or pay off debt or for other one off expenses.
    You would only need to use the transfer money to pay wages if your wage bill was due to exceed the normal wage budget.

    If Ashley has decided to give us a really low wage budget then so be it. But they should stop feeding us bull****, and just be honest about raking back money and lacking ambition.
    They can’t be honest about their spending plans because if they were, they would be crapping themselves that the fans might start to stay away.


  31. I wonder if Cabaye, Marveaux, Ba and all other players being persued are being sold the dream of ‘2 or 3 years of consolidation then try to improve’ or if they are all being told we have ambition to try for Europe.
    I wonder how they will react if they find out that our ambition is in fact just to hover around the middle of the table?


  32. Pootle,

    Exactly. Concerns that are shared by Jose Enrique, hence him wanting out.

    I don’t understand why fans accept mediocrity because ‘that’s all we have ever been’ I have only ever earned a certain salary through my entire working life, it’s all I have ever known….yet I still aspire for more 😕

    The amount of money the club generates, the fan base and potential to bring in a couple of quality players is all there. What have Spurs got that we haven’t? (apart from being in London)


  33. @pootle

    how do you know cabaye was promised europe. what i remember him saying was he likes our plan for the future there was no mention of europe.

    the doom and gloom is getting old now. what would make you happy spend millions, win the league then fall from grace end up in administration and not have a club to support in the future because of crippling debt. ashley is being sensible with the club so why does that make him such a bad man, i dont get it. the future of the club should be more important than spending money on overpaid pricks.


  34. Exactly Moreno.

    To paraphrase JFK ‘..some say “Why the moon, why choose this as our goal?”‘
    ‘We choose to go to the moon, and do these other things not because they are easy, but because they are hard’


  35. He discussed the plans he’d been told about in an interview.

    The happy-clappy ‘I believe in fairies, I do, I do, I do’ attitude is getting old now. It smacks of immaturity an an inability to face reality.

    And your argument about spending millions until we go into administration?
    Just another, rather typical, logical fallacy.
    Nowhere have I said that we should spend money in that manner. Neither has Moreno, Bobby or any of the many, many sensible ‘doubters’ that post here.
    Well done you though, for criticising us for what you wish we said, rather than what we actually say.


  36. Here’s the Cabaye quote.

    “I am going to play in the best championship in the world for a club who want to get back into Europe within a year and one who are building an ambitious team.”


  37. I don’t think anyone is asking to blow millions on average players and I’m very happy with what we have so far and imo the squad as it stands has a good chance of finishing top half and on paper is stronger than the squad that finished last season imo, my “gripe” would be that if we just showed that little bit more ambition and invest in a couple more quality(preferably with prem experience) then we could make a serious push for a top 8 place and possibly a Europa spot. I don’t think that is too much to ask and the cash is there, now this may well happen and I’ve said all along I’ll wait until the window shuts but as it stands I’m not overly confident, wanting to spend quality money on quality “proven” players doesn’t make me a bad person nor does it mean I want to go back to the days of throwing quality money on has beens, never has beens and mercenaries. All I want is the best team possible on the pitch with the resources available to the club, as it stands I havn’t got that imo.


  38. Pootle, It doesn’t matter a toss mate, if he spends 30K a week out of the Carroll money or 30K a week out of the gate money, or anything else classed as turnover. 30K of gate money not spent on wages is 30K available for whatever else he wants to spend it on.That also could be one off expenses or transfers. Like I said, its the same pot.
    What I think you are getting at here is not where the money that he spends comes from, as such, more whether he actually spends money at all.
    We’re now talking about the difference between his accounting philosophy and him being a tight tw@t. Albeit a tight tw@t who is owed 130 million by the club.


  39. Archie I’m saying that wages should be a percentage of what we can assume to stable income.

    Let’s say the club earn around 90 million from relatively stable income such as gate reciepts etc. The wage budget should fall within that. If they get a cash bonanza say 35 million, they may well show 125 million for that year but it would be madness to spend say 110 million on wages because that will have to be sustained by selling more players eventually as the club can only count on a regular income of around 90 million.

    Ashley appears to be trying to keep the wages well within our current level of sustainability. That would be a good thing provided he doesn’t go too far the other way, which at the minute it looks like he is.


  40. Yeah richie, spot on.

    I don’t think any of us are asking the club to put a bid in for Tevez, are we?

    I just think with a few more decent players we have a really chance at pushing on and at least trying for Europe or a cup.

    Or we can just tread water around 10th. Our good players will want to leave if that happens.

    That’s the problem with just treading water -eventually you sink


  41. Brilliant article endorsing the sound foundation that is being built to actually win something.

    That would be wonderful for us & him.


  42. Pootle, you’re spot on with the wages thing. It was said when we went down that for a club to be sustainable the wage bill should be less than 50% of annual income. When we went down ours was just short of 80%.
    It was quite funny at the time that all those players who dropped into the Championship pulling in 60 grand a week and playing second division football were considered loyal heroes because they stuck with us.
    Hardly a surprise at 60K a week.
    It will be interesting to see what percentage of our earnings our wage bill is this season – particularly if Barton, Smith, Xisco and Enrique move on. There’s got to be knocking on 10 million a year there.
    I’d guess maybe as low as 30%


  43. Very interesting article Archie, although not rose-tinted, you do make it all ‘sound’ better.



  44. Hello all NUFC fans I’ve just signed up to this blog, couldn’t stand the Chronicle any more, unbelieveable negativity coming from so called fans, at least there seems to be a lot more positive views on here. That article above was an excellent read and sheds some light on whats going on at the club.
    Can’t wait for the season to start, always think this will be our year, can’t help meself.


  45. alreet Tony, if you’re after a bit of banter you’ll need to keep it on the latest story posting through the home page. Everyone seems to immediately evict and re-locate when a new thread goes up!


  46. nee wurries, can be a good craic. Well easy to waste time when you should be doing other things. Anyway, speaking of which……..


  47. I am very positive about our signings esp. Ba and Cabaye but I don’t see us in contention for a place in Europe yet or in the near future. With Enrique leaving and little or no depth in the back 4 you can’t hope to be a consistent winner in the Prem. The remainder of the new signings Abeid, Marveaux, and even Ben Arfa and Gosling still have to prove themselves. We just don’t know what we have yet as a first team. After 8-10 games of the season we can begin to guess roughly where we might finish. Don’t be surprised if it is very close to the middle, around 10th plus or minus 2 postitions. Marveaux may end up being a French Routledge for all we know. And several of our bench players are Championship level at best. Are we building toward a great future or just marking time while the owner makes the team a great buy for a future owner?


  48. Finally a voice of reason! I was almost in tears to see so much level-headed arguement and whats that? Optimism?!!!!!

    The guy has made mistakes, but it is now plain, that even if he’s no NUFC fan, his interest and ours are in the same thing. Like it or not, he (maybe inadvertantly) is doing more for our club than any of the sheiks or russian oligarchs are doing for theirs: making the club self reliant.

    Now if everyone could tone down on the personal insults maybe I could be a proud NUFC FAN once more.


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