Toon finances: is Ashley really our saviour?
Posted on August 11th, 2011 | 28 Comments |
One of the things we often hear is that, even if he has no other redeeming features, at least Mike Ashley is sorting out the finances at Newcastle United.
It has become something of a mantra for the pro-Ashley fans but let’s have a look at the figures and see if that mantra is justified.
Before I do that though, I need to disclaim a few things. I’m not a financial expert. I do know a bit about running the books for Limited Companies but obviously nothing the size and scale of Newcastle United.
Additionally, the figures I’m quoting below are from financial reports filed at Companies House which I paid to access via a popular online supplier, so I’m merely trusting that they’re correct.
A First Look At The Books
The following table of figures is taken from the last five years of reports filed by Newcastle United Ltd, which are currently complete up to the 09/10 financial year (Newcastle run July – June for their financial years):
| 05/06 | 06/07 | 07/08 | 08/09 | 09/10 | |
|---|---|---|---|---|---|
| Net Assets | 16.8m | -£12.9m | -£33.3m | -£51.4m | -£68.5m |
| Net Worth | -31.4m | -£54.8m | -£73.6m | -£95.8m | -£98.9m |
| Operating Profits | -£00.6m | -£25.9m | -£24.7m | -£37.6m | -£33.4m |
| Pre-Tax Profits | -£12.0m | -£34.1m | -£20.3m | -£15.1m | -£17.0m |
| Book Value | 16.7m | -£12.9m | -£33.3m | -£51.4m | -£68.5m |
The first thing to note is that since Ashley took over in 2007, Net Worth and Net Assets have continued to decline, so if that’s any measure by which we intend to judge Ashley he fails miserably. However, we have to bear in mind that it takes considerable time to turn around a company and there are encouraging signs in that Pre-Tax Profits are improving. It’s actually a Pre-Tax Loss but it stands at half of what it was before Ashley took over.
Operating Profits don’t look quite so good, although there was an improvement in the 09/10 accounts over the 08/09 accounts.
Perhaps the most worrying figure of all is the so-called ‘Book Value’ of the club. The ‘Book Value’ is essentially what you’d be left with if you closed the company down, settled its debts and liquidated its assets and in Newcastle’s case that has slumped horrendously throughout the entire 5 year period shown in the accounts.
Debt Restructure
One thing Ashley has done is to restructure our debt. We owe him (or the holding company he used to buy Newcastle United) money now rather than other people. Furthermore, the loans he’s given us are interest free, so we have saved money in that respect. Back in 07/08 our interest payments were £6.6m/year but in 09/10 that had dropped to £1.8m/year.
You can see Ashley’s financial injections by looking at the table of liabilities below:
| 05/06 | 06/07 | 07/08 | 08/09 | 09/10 | |
|---|---|---|---|---|---|
| Bank Overdraft* | £16.3m | £10.8m | £00.9m | £35.7m | £10.3m |
| Short-Term Liabilities | £67.8m | £110.6m | £37.2m | £180.8m2 | £154.4m |
| Long-Term Liabilities | £79.0m | £49.0m | £138.6m1 | £25.8m | £37.4m |
| Total Liabilities | £146.7m | £159.7m | £175.8m | £206.7m | £191.8m |
*Overdraft is included in the Short-Term Liabilities figure.
In 07/08 our Long-Term Liabilities suddenly jump from £49m to £138.6m1 as Ashley loans the club £111m, whilst our Short-Term Liabilities drop from £110.6m to £37.2m as Ashley clears what we owe on that front.
Then in the 08/09 financial year he moved a lot of what we owed him from Long-Term Liabilities to Short-Term Liabilities: Long-term Liabilities went down from £138m to £25m while Short-Term Liabilities went up from £37m to £180m2. I’m not totally sure why he moved the liabilities like that but it may have been to reduce our gearing. Gearing is kind of a measure of how we’re funded and it’s based on Long-Term Liabilities and Overdrafts. The better our gearing the less reliant on long term borrowing we are and thusly more creditworthy.
Signs For The Future
But the point is this. There are some good signs, such as operating and pre-tax profits seeming to take a turn for the better, and of course it’s better that our loans are interest-free. Furthermore, financial restructures take time, but Ashley has not yet proved he can do what’s necessary at Newcastle United. Net Worth is worse, Net Assets are worse and the club’s Book Value is worse.
Of course you can blame some of alleged financial recovery’s tardiness on our relegation, but that’s no excuse for Ashley as he was the man who presided over that relegation – it’s not as if he can blame it on the Shepherd regime.
When the 2010/2011 figures are in – probably around May 2012 – we can take another look but, as it stands, there is no proof that Ashley is our ‘financial saviour’ yet and many things can go wrong in the interim.
Intent
For the record, I do tend to think Ashley is moving things in the right direction financially and I also think the 10/11 accounts will show further improvement. But perhaps what interests me most is why Ashley is doing that. Has Newcastle United gone from being the passionate hobby club he once described as one of the “crown jewels of English football” to a financial millstone with which he simply wants to balance the books until he can get his money back?
You see, if Ashley’s engaging in prudent finance now to set us up to be successful on the pitch in future years then I’d give him fair consideration for doing so, but if he’s just trying to make the club pay its way until a buyer comes along and he can get his money back then I’m not happy. The thought of planned mediocrity doesn’t sit well with me.
What do you think?
NUFCBlog Author: Hugh de Payen
I'm a baby-boomer of the punk rock persuasion, currently exiled in Somerset for crimes committed in a previous life where locals keep trying to poison me with something called 'scrumpy'. Hates sprouts, coat-hangers, Cilla Black, ornaments, Steven Seagull movies and 50 Cent (he's not worth 10).
Hugh de Payen has written 634 articles on this blog.
…interesting.
…need to wait until 10/11 is in before we can pass judgement.
…looks better then I thought to be honest.