Newcastle’s Record Profits – But Why So Low?


Newcastle profits in the last financial year were expected to be somewhere between £35M and £50M, but they have come in fairly low at £18.7M, which is still a record for Newcastle.

20-pound-note


The higher profits were expected because of a massive increase in revenue of £33.8M due to this being the first year of the new £3B TV deal, which runs out next summer,

At that time for the 2016-2017 a bigger deal – a massive £5.1B deal for the Premier League TV rights – comes into effect for the following three years.

The simple logic financially is if the costs remain constant from the previous year, then the increased revenue should flow to the bottom line as profits.

Which is why we had several reports saying the profits should be in the range of  (£9.9M plus £33.78M) – around £42.68M.

It is possible to hide increased profits by taking additional costs in the financial year, but we would need more details on the financial results of Newcastle to more fully understand why the profits are not higher than reported.

We thought the extra profits may go to paying off Mike Ashley’s £129M interest free  loan, but that hasn’t happened.

And with Newcastle being a private company fully owned by Mike Ashley, there is no legal requirement (at least in the US) to show the financial figures in any real detail for the public.

They are only required for public companies listed on the stock market – which are  essentially owned by the public.

Maybe we will get some explanations about why the profits were not even higher in the coming days – there are extra costs somewhere.

Newcastle could have paid some substantial money towards the costs of the upgrades to the the Benton Training grounds, which should be starting shortly.

But duty calls – and I have to take my dog Milo out for his morning walk – must keep my priorities right.

😀

Comments welcome.

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40 comments so far

  • Graeme

    Mar 30, 2015 at 10:52 AM

    Comment #1

    Smoke and Mirrors spring to mind lol

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  • jayphoto

    Mar 30, 2015 at 10:56 AM

    Comment #2

    No chance mash is doing anything illegal at newcastle but you can guarantee he’s using every dirty loophole and tactic in the book.
    The key for me is Charnley saying the club can invest in things. Fat Mike owns 172 companies. He could easily and legally invest monies from newcastle into say Mash beta or alpha and then extract money from there away from public gaze and fan interest. The key is his intention for newcastle which lets be honest no one really knows… If he is just in it to make money then theres a million ways you can extract money from a private company without it being clear. If hes in it just for sports direct exposure you’d think the current run of losing would harm sports direct by association (or at least wouldn’t help)

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  • Average_Contents

    Mar 30, 2015 at 10:56 AM

    Comment #3

    Funny that BDG isn’t it. EVERYONE else is questioning them too apart from the troll yet you single me out for my accounting skills. Like I said it doesn’t take an accountant to work them out just simple arithmetic really like ED states. You go make up some excuses as to why it’s so low. Can’t wait to hear those.

    I’ll give you the Iantoon comment though, that’s spot on.

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  • Average_Contents

    Mar 30, 2015 at 11:00 AM

    Comment #4

    Jayphoto

    Both of those scenarios You surmised are probably accurate. Why do one or the other when he can do both and get away with it.

    Slug out.

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  • optimistic prime

    Mar 30, 2015 at 11:00 AM

    Comment #5

    Ed

    There’s no profit, Jeff says the tax man took it.

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  • Lindisfarne

    Mar 30, 2015 at 11:06 AM

    Comment #6

    Are the ‘Operational Costs’ the players transfers/1st years wages only?

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  • 3hourswasted

    Mar 30, 2015 at 11:07 AM

    Comment #7

    The club have to register the full accounts with Companies House so any member of the public can see the detail. The accounts aren’t available on the Companies House web site yet but will be in the next couple of days. You can download a full copy of the audited accounts for £1. This applies to private companies as well as public companies.

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  • Lindisfarne

    Mar 30, 2015 at 11:08 AM

    Comment #8

    Sorry, to complete the question:
    Are the ‘Operational Costs’ the players transfers/1st years wages set against the money raised from player sales?

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  • beermonkey

    Mar 30, 2015 at 11:11 AM

    Comment #9

    wages are our biggest expense but we have slowly been offloading players and over all from last year I would say our wages would be down
    not sure what we paid remy but 80k a week seemed to be what was said and mbiwa was on 50 60k from what I read plus all the players we managed to ship out

    I am not surprised the expected profits not as high as expected
    corporation tax is about 24% so we posted profits of 25mill and paid 6mill in tax roughly to around 18mill in profit

    given our tv revenue was up around 30 mill there does appear to be hole

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  • Jeff from Benwell

    Mar 30, 2015 at 11:14 AM

    Comment #10

    The Assoc of Accountancy Technicians asked
    Can an Individual be classified as an Asset?

    Best person to ask would be the finance manager of a football club.

    Here’s Aston Villa:

    “We do, as you suggest treat players as an asset. The cost of acquiring a player can be made up of many components. These include the transfer fee itself and agents fees. The costs are capitalised and included as intangible fixed assets. These costs are then depreciated or ‘amortised’ over the length of the players contract. The amortisation charge reduces the value of the asset and creates a charge in our profit and loss account. As an example if we purchase a player for £1m on a 4 year contract we would have an amortisation charge of £250k per year. At the end of year 1 he would have an asset value of £750k. At the end of year 4 he would have a value of nil.

    If a player signs a contract extension we would amortise the remaining asset value of that player over the length of the new contract.”

    That might clear things up for some.

    However I find it intriguing that so many players contracts end this June meaning in effect at that time they have no value in NUFC’s books and ANY money made on them must be spent straightaway to obviate tax next year
    One would almost think MA had planned it this way

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  • croftus5678

    Mar 30, 2015 at 11:27 AM

    Comment #11

    so we are saying that every prem club apart from the mega rich that spent over 20mil is now further in debt ?

    it doesnt wash imo ! most was expecting this lol we had a feeling something would be covered up and the debt wouldnt come down and the 60mil on players was pure sci-fi >.<

    even if tax was bought into an issue and we do believe the accounts listed you cant tell me that after tax the 33mil will amount to 9mil after tax ^^ thats like 70% tax rate

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  • Ibizatoon

    Mar 30, 2015 at 11:29 AM

    Comment #12

    Jeff…Are you suggesting we’re going to go mad and blow any money we can receive from offloading players whose contracts run out in June?

    As for amortisation, thanks for the explanation, I’m sure it’ll come in most useful to many. However, I think the issue for most is not the concept of amortisation, but that the club have said transfers fees are accounted for in one lump sum, including wages, right?

    I am by no means an expert on the subject and admit, I may well be missing something.

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  • optimistic prime

    Mar 30, 2015 at 11:30 AM

    Comment #13

    Jeff

    However I find it intriguing that so many players contracts end this June meaning in effect at that time they have no value in NUFC’s books and ANY money made on them must be spent straightaway to obviate tax next year
    One would almost think MA had planned it this way

    How are we going to make any money on players who are out of contract and can leave on a free?

    If you keep grasping at straws you might find one to hang on to!

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  • AncientC

    Mar 30, 2015 at 11:31 AM

    Comment #14

    The wages should not be huge problem.

    The wages as proportion of the club turnover were 65% in the 2012/13 season. One of the lowest in the Premier League.

    You can add to that, the fact that wages haven’t changed dramatically whilst the revenues are larger. (Other clubs are increasing their wage bills)

    Ashley is wringing NUFC like a damp cloth in every single area, squeezing the very last drop out of the club.

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  • Ibizatoon

    Mar 30, 2015 at 11:36 AM

    Comment #15

    OP…Don’t be hasty, there may yet be a master plan as to how we’re going to fund a summer spree with funds generated from players who can leave for free.

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  • hibbit

    Mar 30, 2015 at 11:37 AM

    Comment #16

    just waiting for bills son and ian toon to put us all right

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  • croftus5678

    Mar 30, 2015 at 11:38 AM

    Comment #17

    http://www.totalsportek.com/money/english-premier-league-wage-bills-club-by-club/

    after santon/mbiwa and our loans have gone out and we have chucky/perez in our wages have gone down by 2 mil so i dont see how they can say its increased.

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  • Jeff from Benwell

    Mar 30, 2015 at 11:40 AM

    Comment #18

    Ibiza
    No one has seen the balance sheet.
    We don’t even know how much cash is in the bank !!!!!
    Hell I don’t even know who the clubs bankers are.
    It used to be Lloyds Bank Grey street but I doubt it is now.
    Is the PL money paid in one lump sum at seasons end or in graduated payments throughout ?
    Questions none of us know the answer to but some are convinced Asley’s doing the dirty on everyone

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  • optimistic prime

    Mar 30, 2015 at 11:42 AM

    Comment #19

    Ibiza

    Sorry 😉

    Even if we lost a kid who we got compo for it would take anywhere upto 2years for the two clubs to reach a agreement, so how do you spend money you haven’t got or know how much it will be?

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  • hibbit

    Mar 30, 2015 at 11:43 AM

    Comment #20

    we will just have to except it we haven’t got the money we can not compete with even the small clubs ashley has us by the nuts and wont let go

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  • Ibizatoon

    Mar 30, 2015 at 11:45 AM

    Comment #21

    Croftus…I don’t believe those players wages will even be a factor, as these accounts are for the last trading year, not this one mate.

    Jeff…As I said, I’m no expert, so perhaps should dig a little deeper before commenting further. One thing that does strike me though, is the cash in the bank point. Surely we should have an idea what was in the bank the year before? If so, wouldn’t any change in this balance be from the past years profits / loss?

    As for the PL money, they’ve included those figures in these accounts, haven’t they? What relevance does when they pay it have?

    Ashley has no one to blame but himself for the level of trust.

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  • Jeff from Benwell

    Mar 30, 2015 at 11:47 AM

    Comment #22

    optimistic prime
    Hands up
    I didn’t think that one through
    Players as assets is hard to get ones head round
    I was thinking of them as normal written down assets – doh

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  • martoon

    Mar 30, 2015 at 11:48 AM

    Comment #23

    On a lighter note I’m disappointed with Ed’s choice of name for his dog surely Shearer or Sir Bobby would have been appropriate 🙂

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  • Lilongwe Geordie

    Mar 30, 2015 at 11:49 AM

    Comment #24

    Jeff,
    How come the club mentioned the player purchases that occurred in the previous financial year (12/13) when they announced those accounts last year? If they aren’t relevant or included then they wouldn’t have brought them up there.

    To quote from the club article,
    “Accordingly, the Club’s cash outlay on players was £28.7million – up more than 30 per cent on the £19.7million spent in the previous season.
    While the Club’s cash outlay on transfers was significantly higher in the period than the £11.1million it recouped on outgoing players, including Leon Best, Demba Ba and Fraser Forster, trading profit on players stood at £10.6million after amortisation.”

    So, it is fairly obvious that player transfers and values are included in these figures.

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  • hibbit

    Mar 30, 2015 at 11:50 AM

    Comment #25

    come on jeff even you must have some doubts the numbers are to far apart they just don’t add up either there useing a different system then every other club or its a fiddle

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  • Lilongwe Geordie

    Mar 30, 2015 at 11:50 AM

    Comment #26

    Player dealings is likely to be included in the operating profit.

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  • Lilongwe Geordie

    Mar 30, 2015 at 11:51 AM

    Comment #27

    The reason the club don’t mention anything to do with players in their current statement is likely because they made zero permanent senior signings during that period. Rather than highlighting that fact, it is better to just not mention it.

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  • optimistic prime

    Mar 30, 2015 at 11:53 AM

    Comment #28

    Jeff

    I hate to say it but you’ve made a point that intrigues me.

    The players as assets, surely it makes no sense to pay any players wages for 4/5 years and let them leave for free.

    How many ASSETS has Ashley let go for free? How many millions could we have recouped by getting the odd million here and there instead of running players contracts down?

    Letting any player go for free is bad buissnes, to let as many go as often as we do is bad buisness IMO.

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  • wynsleap

    Mar 30, 2015 at 11:54 AM

    Comment #29

    It stinks! Like everything this guy does.

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  • optimistic prime

    Mar 30, 2015 at 11:56 AM

    Comment #30

    To let as many go for free as we do is criminal.

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  • JP...from The Rock

    Mar 30, 2015 at 11:56 AM

    Comment #31

    Ashley is a snake and is doing something dirty again like every season. Everyone expected much higher profits and it sickens me that he is surely robbing us and not reducing the interest free loan with the club. He has all of us on a string and yet the club comes out praising themselves and saying how it’s all dandy and we’re better than ever!

    Then I think all the money we have to spend on at least 8 new players this summer will come from that £18M??

    We will be lucky if Ashley spends half of that and even if he did spend the full £18M on players you can just imagine the low low in value all must be.

    A good proven goalscorer would cost at least £9M, and that is our most pressing issue, that and our defense!

    We seemed doomed as I haven’t even mentioned the money needed to spend on a good new coach.

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  • James RS

    Mar 30, 2015 at 11:57 AM

    Comment #32

    These accounts will be looked into you just get that feeling!

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  • optimistic prime

    Mar 30, 2015 at 12:01 PM

    Comment #33

    If a football club does not aspire to achieve success on the field, then any perceived achievements within the boardroom are irrelevant to all but those who stand to benefit from them personally.

    http://m.thenorthernecho.co.uk/sport/11888402._/

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  • Lindisfarne

    Mar 30, 2015 at 12:05 PM

    Comment #34

    Ok, lets tackle my question another way. From the figures stated Turnover (TO) is the amalgamation of Matchday fees, PL payment and Commercial income.

    2012/13 – T.O. £95.9M profit £9.9M Club costs £86M
    2013/14 – T.O. £129.7M profit £18.7M Club costs £111M
    Increased costs of £25M

    If the ‘Operational revenues’ have created an additional £4.7M then the true Club costs have risen by £29.7M, approximately 35%. Or does the ‘Operational Profit’ not come into account as it is just a reflection on the increased value of the playing squad/infrastructure as an asset?

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  • croftus5678

    Mar 30, 2015 at 12:06 PM

    Comment #35

    i’m thinking 10mil estimate on each of the 2 cb’s we need and atleast 10-15mil on a decent striker as a min without any of our better players leaving !

    in other words we have no chance what so ever and long before next season has even started i’m already holding my head low and not looking forward to another no ambition season !

    i’ll say same as last season and the season before when we atleast had pards to partly blame for it ! this year its purely on ashley.

    do the best for our team for once ashley and stop the penny pinching and greed or i’ll use all the willpower i have to not go to another game again when you own our club.

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  • Jeff from Benwell

    Mar 30, 2015 at 12:07 PM

    Comment #36

    Lilo
    That quote from you is a bog standard statement that assumes the reader has both the trading account and balance sheet in front of them.
    Of course we only get to see the trading and P&L figures.
    Im not saying Ashley isn’t a fox and probably knows more about accountancy tricks than any 5 readers combined on here.
    Where we diverge is the extent to which I and others think it is to the detriment of NUFC

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  • JP...from The Rock

    Mar 30, 2015 at 12:32 PM

    Comment #37

    croftus5678 – Ashley must be quaking in his boots to know that you and your family might stop attending the games…He couldn’t care less if one family family doesn’t go anymore. To really hrt him it has to be within the thousands!

    I am so fed up of being lied to and ridiculed by this club I love. I fking hate Ashley with a passion. His smug face on match days makes me physically sick.

    GET THE FK OUT OF OUR CLUB ASHLEY, YOU LYING SNAKE!!!

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  • Hobs

    Mar 30, 2015 at 1:40 PM

    Comment #38

    Isn’t it so that the financial year starts at a later date than january 1st?

    If so then money from selling players in january are not part of the income of last year, only income from this january would be.

    We did spend a sizable amount on players this summer, so can the hidden costs be the net spend, as we did not sell any player for a lot of money during the financial year, but spent money on Cabella, De Jong etc?

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  • toonicle

    Mar 30, 2015 at 3:41 PM

    Comment #39

    I could see 15-20 Mil going to the new training ground but wouldn’t you think they would want to highlight that, since it’s basically the only positive thing going on right now? Something is fishy.

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  • KevinLee

    Mar 30, 2015 at 6:46 PM

    Comment #40

    All profit in casino now

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