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Ashley not up for the gamble?

5th place in the Premier League, arguably the toughest in world football and within a breath of the promised land that the riches of Champions League can bring.

Celebration, not quite, optimism, well, you would have thought so but here we are, just over 9 days until the new season kicks off and Mike Ashley (or Derek) is blundering around with their pockets bulging with spare cash, not able or unable to strengthen the squad considerably enough to mount that assault on bettering last season's fine finish.Maybe it's this lack of ambition that has caused the rumoured rift behind the scenes at St James' Park. 'Rumoured' because we never get to find out most things but as fans we're savvy to know when to dismiss out of hand or file it in the 'one to watch' drawer.One reason to fall out is obviously the lack of signings and the constant talk that we can't agree a deal. It's not rocket science to pay a little over the odds if it benefits the team and with our squad not strong enough to compete on all fronts. The financial gain to get a deal over the line must outweigh the gamble. I thought our owners would be up for the gamble but as yet nowt.Cash can't be a problem because the 'experts' on our forum have monitored the books for years and we're always there or thereabouts in regards to our figures.

Last season will show an operating profit, with extra prize money from the league position, TV revenue, gate money and the Virgin shirt deal.Leon Best and Fraser Forster show almost total profit for the new season so you are looking at 5m there, plus around 5m extra operating profit, maybe a bit more if reports of the shirt deal are true and more when the new TV deal kicks in.

On the tax side, you are looking at up to 40m to increase amortisation sufficiently to bring the club down to break even.The other part of the equation is cash flow. Could the club spend 40m?There will be a cash surplus from last season plus the season ticket money already in, plus the Forster and Best sales, not forgetting the Virgin money. Also, remembering that amortisation accounts for cash spent in previous years, there should easily be around 35-40m available.Against that you have 2 Ashley factors. The first is whether he is planning to sell the club, in which case, it might be easier for him to sell if the club projects a profit. The 2nd Ashley factor is whether he wants to take cash out of the club. Bear in mind, if he does take anything out, it is against his loans to the club. The nice part for him is that if he wants cash, repaying the loan to himself is free of Capital Gains Tax and Income Tax.Yes, it would be sensible for him to spend 35-40m this year if he is in for the long haul but that is not to say that it would be sensible in future years. He has other considerations.

Finally, having got rid of a load of young talent, don't necessarily translate that as 35-40m on the first team. If he is in for the long haul, then a chunk of that could be spent on teenagers to replace the people who have left. The other angle is that by not spending, he gives himself the flexibility to buy in January if he can not find a buyer for the club at a price that suits him.

Anyway, moving aside us doing our speculating, we have a good manager who's won over most, we have a settled crowd even after the PR disasters and we have the cash. Regardless of this, at least we know that Ashley wont go bust at St James'




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The Journalist

Writer: TNMW Mail feedback, articles or suggestions

Date:Thursday August 9 2012

Time: 9:00AM

 

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