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. RichToon says:

    “The club constantly misleads fans and seems to turn the opposite way each time we seem to be on the road to improvement. I’m all for running the club on stable financial footing but football isn’t just a business, it’s still a game we love and a team we love and it’s a love Ashley certainly doesn’t share. He needs to get his money back and get out and let someone with a bit of passion or even interest in football take over.”

    Rich you’ll be getting an email in the morning from Toonsy for not toeing the party line 🙂

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  2. BBM- Think your point about him wanting out is the only plausible explaination in fairness. I actually think he’s already got a buyer lined up, why else be a ****?

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  3. Have we got the clout to keep top players competing for positions. As an example we have Tiote & Cabaye as our defensive midfielders with Gosling & Abeid as backup. We also have Smith & Guthrie. If Smith went do we need to replace him or rely on a youngster coming through. We could afford Matudi @ 13m but are we currently successful enough to justify him warming the bench like a top 4 club would. Hopefully soon yes, but probably not this year. Looking elsewhere it is clear that there are similar decisions being made re routledge & xisco etc. To me this is called planning. I think we got the easy targets early. Others follow as we shift players on and the market hots up. We move forward not by throwing money at it but by identifying targets.

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  4. Pardew is unfortunately the King of Contradiction.

    High wage bill BUT wages accounted for upfront.
    Free transfers BUT blowing a lot of our £35m on them (implicitly stated)
    Big squad BUT suddenly not so big.

    Better to stay quiet and be thought an idiot, than open your mouth and prove so beyond doubt.

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  5. AndyMac
    July 19, 2011 at 21:32

    “Rich you’ll be getting an email in the morning from Toonsy for not toeing the party line”

    Another lie with no basis, fact or foundation 🙄

    I should have left it as Moreno did and kept you on the ban list. It would prevent you looking like an arse by spouting pure lies, which are evidently disproved by the disparate views displayed on this very thread. You boring **** 🙂

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  6. if you have the money where the mouth is then buy the club off ashley…
    why dont u be a Barcelon FC (owned by the people of Barca)…
    just look at Barca and other great team… money does jack all (chelsea)
    good stable teams are what is build within ( barca got most of its players from the academy and so do arsan n manu!
    we have good bunch of youths in lets not buy players 4 the shake of buying… lets get this young guns up to speed and play with the heart than money!…

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  7. So if we’re using transfer income to pay the squads salaries, what are we doing with the 40 million we get from sky and all the cash we get from ticket sales, sponsorships and other commercial ventures (which add up to another 40 odd million) each year? Wake up for god sake!! The 35M we got for Carroll should all be spent on transfers to strengthen the squad, albeit by spending wisely. These goons just keep moving the goalposts concerning where the cash is going and seems like a lot of people are falling for this rubbish.

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  8. I agree with most of what Richtoon says…..but not with what Tom says as the fact that I can read it and disagree with it proves his statement to be that of someone of extremely low intelligence 😉

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  9. Bowburn – I agree. I think Pardew should keep his gob shut and letting his football do the talking. Ultimately it will be that and the results which will be the judge of him. I fully believe the only real say that he has is first team duties like training, picking the team, matchday etc. Beyond that he has no power whasoever IMO.

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  10. Have the club said all of the new players wages will be paid directly out of the 35 million?

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  11. BBM,

    Would you sell your favourite possession, against previous claims that you wouldn’t, if some offered to pay you roughly 6 times more than it’s value? I would.

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  12. I almost didn’t read this as the title made it sounds like another post of the “****ing that we haven’t spent a fortune” variety. One of the few grown up opinions on the club finances about….

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  13. Daverism – the only really contentious contradiction of the lot.

    Tell me though, relatively speaking how much is that £35m worth to us as fans at the moment?

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  14. Someone wrote on here a couple of weeks ago:
    “Since the arrival of Graham Carr we’ve seen Dan Gosling, Hatem Ben Arfa, Cheik Tiote, Yohan Cabaye, Demba Ba and Sylvain Marveaux arrive for less that what it cost Liverpool to buy Jordan Henderson.”
    I just think its sensible business. Nobody can argue that these players are not good enough to help Newcastle challenge for the top 8, so why the persistant whinging about lack of money spent?
    We still have 6 weeks left of the transfer window as well, lets just wait and see if the board can prove all the doubters wrong! 😆

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  15. @Daverism 92. If you sold your sofa for two grand, would you get splinters in your arse watching TV or buy a decent new sofa?

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  16. There appears to be a big divide on either side of this £35m.

    Is it not possible to sit somewhere inbetween and expect a good portion of transfer sales to be spent?

    Also, Sheperd and Ashley are arguably the ultimate ‘rock and hard place’. Is it unfair to want a fit and a proper owner who can run us responsibly but also be a bit of a decent chap, be relatively honest and keep to his word?

    Surely, after years of being taken for a ride we can luck out at some point?

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  17. Lads I hate to say it but its all well and good that the Fatman is lending us Money interest free, But if he didn’t **** things up so much he wouldn’t have needed to lend so much money. So in my eyes he isn’t doing it for the good of NUFC he is doing it for himself and Sports direct.
    Bowburn how da hell are ye doing Fella hope alls good mate.
    Army are you about ?

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  18. Always knew you were a posh git with your shag pile jobey. That’s just what you would let Ashley do to you, but without the pile.

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  19. Evening lads have great news! Bentdner is officially NOT. Going to be a toon player!

    Pards said our targets on tour too so unlikely to be activity … Sorry lads that’s the only positive I could draw from that … 👿

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  20. Dave – yeah not bad mate. Working north of the border at the minute but other than a bout of manflu and a canny cough I’m alright. How’s you?

    Good to see a bit of thinking outside of the box. I don’t doubt in all of this that we have in some ways benefited financially from Ashley’s tenure but the financial side of it is a spin-off from his own needs. Everything else that has gone with it, has almost made administration seem like a good option.

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  21. Nice to read an article which gives a very professional view on the reality of newcastles financial stability and future.
    It’s very easy to criticise Ashley but you cannot fault his business sense. In 3 years time a lot of the big-spending clubs will have serious financial issues. The comment re what happened to Portsmouth is a shining example
    We desreve to be in the top 5 in england but not at any cost to get there. Once ther we need to stay there and push on to win the league. the only way to do that is with solid financial stability and an excellent academy.
    My only wish is that the “voice” of the board. e.g. Mr Llambias would stop the smoke and mirrors and state the truth. This article should have been what the club statements were saying. It’s the feeling that he treats us like unintelligent human beings is what irkd me the most.
    Do I feel good about this season, yes. Will it be easy, no. Will we be in the top half 9th or 10th is my guess.

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  22. Bowburn alls good with me mate ta, ye have to be careful with the manflu it cant be deadly 😆 .
    Newc you touched on a good point about the voice, if he did come out and say that most of the Judas money was going to pay the debt off I would have been fine with that becase as I said the sooner he gets his money he can get out and take the tacky Sports Direct ****e with him 😀 .
    Where’s Bobby I hope he kept me a seat at the window 😆

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  23. John @98
    I’d probably buy some sort of vintage furniture to sit on that i could sell on in a few years for a massive profit! 😆

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  24. To be fair I don’t think anyone’s knocking Ashleys business plan but rather we’re wondering wtf the football plan is.
    I agree at the moment we’re stronger than last season but what is the ambition of the club, top 10, top 8 – I don’t have a clue, it all seems a bit mediocre after listening to years of FFS saying top 4 🙂
    Disclaimer: I def dont want FFS back

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  25. Army no he just said no activity as targets on tour too … Goodness knows who that is!

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  26. 😆 😆 😆 I can certainly write drivel I am a financial adviser after all !!! But I meant read – long day in the office – I am really looking forward to the season and seeing how we compete rather than all this talk – football is a business for all but a few squillionaires! So it is right that we should be profitable

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  27. Be interesting to actually know the finances, bizarre that people keep kicking about that we got 35m for Carroll when it was 30 with 5 based on conditions which may never be met
    Sponsorship is crap when you compare top 6, think people on here ( tho not as much as workys/ed’s blogs) live in some dream world

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  28. Must add, great thread with great comments from allsorts of viewpoints. This is what it’s all about. Well done all 🙂

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  29. LIAM SOUTHERN TOON
    July 19, 2011 at 22:34
    Army no he just said no activity as targets on tour too … Goodness knows who that is

    must be sturridge

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  30. Army imo I wouldn’t get the bairns name and dob with the club crest mate, get them seperate, where you going to get it ?
    Spence i’ll keep the seat for ye lad Batty is in the seat infront so we can kick the back of his chair 😆

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  31. Big dave- sounds fun 😆

    Get W on each ar’se cheek so when you bend owa it says W O W 😛

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  32. big dave , my son is named after his great grandad jackie milburn ( jack ) and me and my lass thought it would be really nice ! i know wor jackie would of aprooved it 😀

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  33. I’m getting a black and white crest some where when im older, dont know where on my body like..

    I will see what needs erasing when I get back from napa with lads next year 😆

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  34. Spencer has a n and b on each cheek army so watch out for that one 😆 😆

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  35. Army imo the 2 dont go together, but its your choice but I often advice folk that are looking different tats done , that they dont go together but some still go ahead but after a while when they comeback in for more work they will say that the wished they had off listened to me 😀 How about getting the crest on your chest and the wee man’s name on the inside of your bicep so he is always by your side ❓

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  36. cheers 4 advice bud by your side is lush but its booked now haha , future number 9 me little laddy man 😆 i wish

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  37. Spence by the time your finished your apprenticship you will have 2 full sleeves 😉 .
    Army I have done footie badges before with names above or below and they look cheap and tacky a bit like sports direct signs

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  38. Dave- sounds good mate…

    Aye, thats why ive got my season ticket below the gallowgate roof, so I dont have to look at them shyte ones on the roof 😆

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  39. Spence I have one but I have never done **** all with it,but I do plan on getting it set up. I had one before with pics etc when I needed clients, but I use to get lots of emails of allsorts of wingnuts asking daft ****ing questions 👿

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  40. Good article and well written.

    To be fair, my gripe is with Pardew acting like a financial advisor when all I want to hear from him is how the players are doing which he is supposed to be his job.

    rather than the role of spin doctor he has taken up in front of the press

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  41. Might come out to NI to get mine done with you dave, if you do mates rates? 😆

    I want a bull on my sholder blade, and NUFC crest somewhere and I think thats it, got to wait till im 18 like because my mum dosent want me to have one.

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  42. Big dave, by the time ive paid to get across, it wouldnt be worth it.

    RT- am I going to have to rage at you, or did you ask? 😆

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