LLambias Lays Out Strained Financial Position At Newcastle

We were wondering when we would hear something about the revenues being generated this year at the club, since Newcastle were relegated to the second division of English football for the first time in 20 years last May.


Derek LLambias – lays out Newcastle’s financials – not good

And as we’ve mentioned Newcastle are still working with a Premier League wage, which is what some of the £20M will go towards that Mike has put into the club recently.

The revenues last year were close to £100M – and of that £74M had to be paid out in wages.

And now our revenues will be reduced by around 50% but the wage bill is probably still at least around 74% of revenues (same as last year), which would be around £37M.

And while fans often get annoyed about the “money men”,  football is now a huge global business now – and whether you like it or not it will never go back to the ways of the 70s and 80s – never – be that good or bad.

And it’s hardly surprising that Managing Director Derek Llambias has said today that the Magpies’ wages are still out of whack – and not at an acceptable level.

We knew that as soon as the transfer window closed, and at that time we estimated it was still around £48M, but other reports suggested it was lower than that.

But if it is £47M our revenues are £50M this season, which is why some massive injections of cash are necessary as the season progresses – and why there cannot be much money available for transfers – and why loan players are the sensible way to go – at least for this season, as we try to get promoted.

Derek told the BBC today:

“It’s been extremely painful – it was a shock, it was unthinkable,” “We did have a business plan in place at the time that we just put into a cupboard, because we thought we never needed to use it.”

“We’ve had to move on since then and it’s given us an opportunity to bring the wages down to an acceptable level in the Premier League, but not in the Championship.”

“We’ve got the highest wage bill in the Championship and that will increase over a period of months to make sure we give Chris (Hughton, the manager) and the team 100% to get us to where we belong.”

“Mike (Ashley, the owner) inherited a very heavy wage bill – and still has some hefty players to pay, but they are good players. They are the guys who are going to get us back up and it’s worth the price if we get back up.”

And Derek has talked about the huge difference in revenues between the world’s most lucrative football league (English Premier League for the uninitiated), and its poor relation(s) has long been known – and if it continues it will kill all but the biggest clubs in England – just you watch.

That’s because the set-up is the big clubs are successful, they earn more so they can buy the best players – so they get better – and earn more – and can get more good players and the success wheel keeps turning.

The opposite is true for the other clubs- and we’ve seen too many English clubs struggle an go under- and that will only get worse if something isn’t done, and done soon.

Derek talked about this gulf:

“It’s huge,” “We’ve dropped from £100M revenue to £50M. A good chunk of that is TV money from the Premier League – £40M. We get a parachute payment of £12.5M.”

“It’s been extremely painful – it was a shock, it was unthinkable (relegation),”   “We did have a business plan in place at the time that we just put into a cupboard, because we thought we never needed to use it”

“We’ve had to move on since then, and it’s given us an opportunity to bring the wages down to an acceptable level in the Premier League, but not in the Championship.”

“We’ve got the highest wage bill in the Championship and that will increase over a period of months to make sure we give Chris (Hughton, the manager) and the team 100% to get us to where we belong.”

“Mike (Ashley, the owner) inherited a very heavy wage bill – and still has some hefty players to pay, but they are good players. They are the guys who are going to get us back up and it’s worth the price if we get back up.”

What Derek means when he says that wage bill will increase, is that presumably we’ll bring  in 4-5 players in January on loan (hopefully), and we’ll need to pay their wages – plus a loan fee.

As we’ve said, most Newcastle fans don’t know too much about the running of a business from the financial perspective – and don’t want to. 😀

But I know a little bit about this stuff, the financials of a big business, having created and run a £1B business for IBM until I retired, and may even be returning to the work force soon with another global consulting firm – maybe.

We think it’s going to be more and more important to run clubs like businesses, after all that’s what they are, and we look for clubs like Chelsea and Manchester United to be called out — as they have massive massive debts – but because of their stature they can also get massive loans.

And when they go after players for say £50M – don’t think for one moment their football business generates the profits to pay for these – it just gets added to their debt – which is causing UEFA President, Michel Platini, significant heartburn.

And as far as clubs like Manchester City go – they are the major cause of the coming collapse of English clubs if things don’t change, and it’s almost obscene what they are bring allowed to do – like Chelsea before them.

What’s the figure they are allocating for players in January – £100M – and that’s got nothing at all to do with what the club is earning.

That will change if Michel Platini gets his ways because the clubs will soon need to be paid for players and the like from the profits of the club – and it will at least help to level the playing field – although not very much – because the big clubs will still have the biggest profits.

Arsenal are about the best run club in England, they are fiscally responsible, and it also helps to have a sensible (and brilliant) manager like Arsene Wenger.

But they’ve shown you don’t have to pay out ridiculous fees for players, if you have a world class Youth Policy. And the London side are just great to watch too, as was evidenced yesterday when they took apart AZ Alkmaar 4-1.

That’s the club we should try to emulate.

Comments welcome.

27 comments so far

  • stevt_0_3

    Nov 5, 2009 at 11:09 AM

    Comment #1

    Can I just point out that all but 1 of the current first team were either signed whilst Ashley was in charge or were given an improved contract during his reign (Joey Barton), so his whinging about the wage bill is his own doing!

  • sirjasontoon

    Nov 5, 2009 at 11:15 AM

    Comment #2

    Tight Cockney Criminals….not fit for club ownership…no ambition.

    You got us relegated,deal with it.

  • Macas35

    Nov 5, 2009 at 11:41 AM

    Comment #3

    stevt_0_3 – Exactly, they make it sound like our current wage bill is Shepherd’s fault when all the high earners apart from Nicky Butt were signed under their regime.

  • premier

    Nov 5, 2009 at 11:45 AM

    Comment #4

    You pay peanuts and get monkeys normally, however in case of the Toon it appears you pay top dollar for them!!

  • lesh

    Nov 5, 2009 at 11:51 AM

    Comment #5

    A well penned and balanced article Ed and it’s not before time that the club explained the fiancial context of its operations. What they’ve done and are doing with the finances makes perfect sense to me and sits in the real world in which clubs operate.

    Just look at Hull and Portsmouth’s plight….. not a million miles away and you can be sure they’re not the only ones suffering.

    I am not an apologist for Ashely and Llambias – their communication’s been either dubious or non-existent and it’s not before time they let the fans know the background to thier deeds.

    A regular dialogue with fans’ supporters groups would be very helpful as communication pays more dividends than silence!

    Maybe that’s something for Llambas and Ashely to think about…. you never know, it may help redeem themselves a little so come on guys, please talk and people will listen.

    I believe this statement’s been very helpful and the club’s plight should have been shared with the fans a long time ago.

    Let’s think before we start thinking about demos etc… get behind the club and teh players and fingers crossed, we may see the didivends of frugality in the form of promotion and survival therafter.

    Howaaaaaaaaay the laaaaads

  • SirAlan

    Nov 5, 2009 at 11:56 AM

    Comment #6

    This is all Ashley’s doing and untill people STOP making excuses for him and FORCE him to sel it will carry on…we are now even known as sports direct ….what a disgrace (same as the people who support this regime or are making excuses for it) !!!!

  • Mags

    Nov 5, 2009 at 12:06 PM

    Comment #7

    Ashley = Liar
    Llambias = Liar

    Ashley chose to buy it, no-one forced him. Since then he has caused a furore at every transfer window, either by sacking the manager or putting the club up for sale to avoid putting money into the first team.

    The lack of investment and disgraceful management of the club’s affairs got us relegated, so do not expect sympathy.

    You have abused the club and you have treated your customers (the fans) with contempt. You now add insult to injury by tagging you tatty clothing outlet’s name to St James’ Park.

    Sick of your lies and excuses and the shame you have heaped onto our famous club.

    You are lack a cancer that needs cutting out.

  • stevt_0_3

    Nov 5, 2009 at 12:10 PM

    Comment #8

    3 Macas35 – Even Nicky Butt’s contract would have expired by now, but Ashley gave him a new contract, likewise with Ameobi, Harper etc.

  • Rich TOON bristol

    Nov 5, 2009 at 12:23 PM

    Comment #9

    well im gonna try to stop being negative and draw a line under all thats gone on and just see what happens from now untill end of season and hopefully promotion! Hopefully we’ll get some quality in and start playing football with some creativity and flair, and no more 4 5 1 chris!! If you play guthrie along side smudge instead of butt with carrol ranger up top theres no need for this negative strategy! Its time to get behind the team and ignore what goes on behind the scenes for now, they know we hate them with passion so lets see any positives they come up with as a surprise bonus untill they F Off and just concentrate on the football, roll on some goals on saturday (home goals!) and another 3 points Howay the lads!!!!!!!!!!!!!!!!!!!!!!!!! P.s nice to see that we have got a squad of committed players who seem to love the club for the club not just the money, why is smudger not f/t captain!!??

  • sirjasontoon

    Nov 5, 2009 at 12:44 PM

    Comment #10

    I just want these idiots out of the club…I am getting more angry as the days go by.

    Constant Bull5hit,Lies and Contempt for the fans and history.

  • sirjasontoon

    Nov 5, 2009 at 1:05 PM

    Comment #11

    Either pump some decent money in Mike or sling your HOOK.

  • p doff

    Nov 5, 2009 at 1:14 PM

    Comment #12

    Mags- I agree, the small investment in a good manager (compared with a players costs) would have been a major investment. Instead the owner chooses the cheap option, one which I hope will succeed but on current performance I doubt.
    Cheapskates Cashley and Lambiarse continue their quest for glory with cast off weapons.

  • Waldo P. Barnstormer

    Nov 5, 2009 at 1:31 PM

    Comment #13

    well a rough gate for the season will be about 1 to 1.2 million people, 1.2 if we staytop of the pile.

    times that by say £20 a ticket taking into account freebies and kids (£24 mil). With merchandise, beer and food sales, sponsorship, geordie jackpot (i know that that may not be much but it will all add up)
    Seems that there may be a little more than £50 million revenue. I might be wrong but I think I smell Bullshit

  • Johno Toon

    Nov 5, 2009 at 1:40 PM

    Comment #14

    I think everyone knew we would have to take some sort of finacial hit when we got relegated, but his figures do not add up from what i can see, the 30 odd million we recieved in transfer fees our wage bill dropping paracute payments the ” 20 million ” from mike deep pockets ashley it just doesnt add up for me.

  • Johno Toon

    Nov 5, 2009 at 1:43 PM

    Comment #15

    I agree waldo it doesnt add up

  • sirjasontoon

    Nov 5, 2009 at 1:56 PM

    Comment #16

    Look at all the players that have been sold since Mike took over that’s a fair few million that was never reinvested in the 1st team.

    I hate this pair of criminals.

  • stuart no9

    Nov 5, 2009 at 2:09 PM

    Comment #17

    every body knew the devastating effect relagation would have on this club,everybody apart from the owners.When i look back at what went on last season,relagation could have been easily avoided,i feel the owner and his cronies went out of their way to make sure we went down, for financial reasons,that it would be of benefit to them,than in the prem , imo, apart rfom the financial loss,relegation may not be so much of a bad thing,long term.I ts been on the cards for awhile,and alot of issues have come to the surface,we have found out the true extent of the mess this club was in Am i looking forward to prem football next season? not really we are lagging years behind, even the smallest cllubs You need to spend when you go up and thats not going to happen.As for our owner,the rift will never heal to much has gone on for the fans to forgive, the final straw coming with the changing of the name.he might have won this battle but he wont win the war , our time will come mr Ashley best of luck with the demos on saturday

  • Johno Toon

    Nov 5, 2009 at 2:12 PM

    Comment #18
  • lesh

    Nov 5, 2009 at 2:15 PM

    Comment #19

    It gets better…… the Times have reported a secretly taped Ashley/ Llambias conversation.

    It makes interesting reading.


  • stuart no9

    Nov 5, 2009 at 2:38 PM

    Comment #20

    ashly getting 5 years BRING IT ON

  • listie

    Nov 5, 2009 at 3:35 PM

    Comment #21

    Nothing to do with NUFC, but this is relervent to the point made about EPL. A few weeks back I read an artical that Liverpool refinanced the hugh debt they have but one of the proviso is that they are in the Champions League!!! Couldn’t happen to a nicer club 🙂

  • Geordiedoonsooth

    Nov 5, 2009 at 4:35 PM

    Comment #22

    We are in big sh*t and will remain so as long as these two w*nkers remain in charge. I am sick to the teeth of these two & will not be back to SJP (or whatever the two idiots want to call it) until they have gone for good

  • NorCal ToonFan

    Nov 5, 2009 at 5:00 PM

    Comment #23

    I’ve not seen it mentioned yet, perhaps I just missed it, but I would be this means Colo is out in January. That and the interest in Cort and Kilgallon. Sell your highest paid player for a quite a few quid, remove his outrageous wage, and get 2 for the price of 1…with some left over as well. Sell Jonas and you can bring in Skelberg (sp). Those are my thoughts around the wage bill. Say goodbye to the Argies.

  • Paul141726

    Nov 5, 2009 at 9:02 PM

    Comment #24

    Someone stated earlier about most of these players being Ashley signings and that many are on prem league wages or very close. All that is fine if we had remained in the prem. Where were the clauses in these contracts concerning reduced wages if (by chance) the club were relegated. As far as I’m concerned, this was fiscally irresponsible of Ashley and Llambias. Just another example of their piss poor prior planning.

  • dave 1961

    Nov 5, 2009 at 11:45 PM

    Comment #25

    yes they had a plan in case of relegation, stick a brown paper bag on their heads, and pretend to be an alcoholics beverage for 4 months. then do nowt for months, then employ the chuckle brothers as managers, then finally when all seems lost, re brand, bet they were stotting when they thought of the name. plonkers.

  • jordi

    Nov 6, 2009 at 8:05 AM

    Comment #26

    lesh that times article is made up.

    “Reporter imagines a conversation…”

  • Ericles

    Nov 6, 2009 at 10:38 AM

    Comment #27

    Hey Llambias – are your wages at an acceptable level? If you want a strain I will give you one.


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