Football Finances

[Mister E]

Funny how other clubs seem to be making money - Leicester announced profits in the late £20m about 4 weeks' ago and now the Barcodes are reporting similar performance.

We do appear to be shite all round right now.

[PeterWithesShin]

Newcastle will be in the shit if they drop.

With this season’s £80m spend on new players having wiped out their cash reserves and Newcastle’s first-team players lacking relegation clauses which would reduce their wages by around 50% in the event of the team dropping into the Championship, it is clear the impact of dropping out of the Premier League would be devastating.

“In total, the summer 2015 and January 2016 transfer windows have seen a net spend on the playing squad of just under £80m, and a significant increase in the club’s annual wage bill.”

[Chris Jameson]

Newcastle will be in the shit if they drop.

Isn't that what everybody was saying last time they were relegated?

[PeterWithesShin]

It's there in their accounts, last time it was probably just people guessing.

They've spent £80m, significantly increased their wage bill and have no relegation clauses. If that was us, would you be worried?

[Mister E]

Newcastle will be in the shit if they drop.

With this season’s £80m spend on new players having wiped out their cash reserves and Newcastle’s first-team players lacking relegation clauses which would reduce their wages by around 50% in the event of the team dropping into the Championship, it is clear the impact of dropping out of the Premier League would be devastating.

“In total, the summer 2015 and January 2016 transfer windows have seen a net spend on the playing squad of just under £80m, and a significant increase in the club’s annual wage bill.”

And we don't know how many of our players have relegation clauses in their contracts. You'd rather hope that the performances of the last 5 years would have resulted in them being standard for any new player. But for this club, anything is possible.

[PeterWithesShin]

That's not the point though, i'm talking about Newcastle, not us. We may be fucked as well, but Newcastle are admitting they are.

[peter w]

How does the author of the piece know about player's contracts? Plus, how often do fans,a nd others, speculate about the finances of a club and expect them to go pop only to see them carry on seemingly regardless?

[PeterWithesShin]

It's been widely reported in most of the papers.

As an example from back in March in The Guardian

As Newcastle failed to insert relegation clauses – automatically reducing players’ wages by 50% should they drop into the Championship – into individual contracts, there is a suspicion certain players lack sufficient incentive to fight for survival.

McClaren disagrees. “I really don’t believe that’s a factor. We’ve got very good individuals and when they click together we can beat anybody, but when they don’t we can lose to anybody.”

[placeforparks]

How does the author of the piece know about player's contracts? 

agents shooting their mouths off.

journalists and agents feed off each other.

[Ad@m]

Profit really isn't the be all and end all when it comes to football finances.  The £80m Newcastle have spent over the past two transfer windows is an expense in all reality - it bears no relation to how much they might get back if they were to sell those players.  However, the £80m will trickle through as expenditure over the course of the next 4/5 seasons in line with the contracts the new players signed.  Likewise the current profit figure will be affected by the transfer spending from 4/5 years ago.

Cash is a much bigger issue - Newcastle's reported wages were c.£65m but their statement admits their transfer activity since June 2015 has seen a 'significant increase in the Club's annual wage bill'.  Their revenue was £129m but includes £77m of TV money leaving £52m of matchday and commercial income, both of which are likely to reduce in the event of a relegation. 

Given they admit to having utilised all of their cash reserves during the last two transfer windows it suggests a £20-£30m hole in their finances they'll need to fund from somewhere next year, whether that's through some sort of cost reduction, player sales, Ashley putting his hand in his pocket, or a trip to the bank (they don't have any external financing according to reports).

They're not necessarily any worse off than us but the profit figure they've reported is very misleading if you're trying to work out their ability to cover their expenses over the coming years.

[Risso]

On the other hand, have a look at Mike Ashley's holding company, MASH Holdings Limited, which owns Sports Direct and the football club.  The 2015 accounts aren't on Companies House yet, but the 2014 ones show that it made a £400m profit, and was sat on £380m of cash.  Now obviously Newcastle's position will depend on his willingness to support them, especially if they go down, but they do at least have an owner who is successful in business, which in my opinion gives them a big advantage over us, being owned as we are by the clueless Randy Lerner, who either can't or won't spend the money we need to.