Newcastle in $27.7 million loss LONDON, Oct 16 (Reuters)(DS) - Newcastle United made a pre-tax loss of 18.9 million pounds ($27.7 million) in the year to July on turnover up one percent to 45.1 million pounds. The English premier league side said on Monday an operating profit of 800,000 pounds had been offset by activities in the transfer market where the overall cost of player trading increased to 19.9 million pounds. The club also acknowledged that "revenues were undoubtedly affected by the negative impact of our decision to ask a number of fans to move to alternative seats." Newcastle fans are among the most fervent in British football. News last season that some season ticket holders at its 52,000-seat St. James's Park ground were to be moved to different seats to accommodate corporate hospitality guests caused uproar. Displaced fans launched a high-profile legal battle wich ended in defeat in the Court of Appeal in June.

-- Anonymous, October 16, 2000

Answers

Is this a new website Dougal? OhdotMYdotGOD

-- Anonymous, October 16, 2000

Of course we have sold #14.5M (worth?) of players since July...... but have then spent it all.
You seriously worried Dougal?

-- Anonymous, October 16, 2000

Creditors stand at #70 million!

-- Anonymous, October 16, 2000

Geordie, yes. This isn't a comfortable position for a very small PLC. We are incresaingly depending on filling the ground.

-- Anonymous, October 16, 2000

Where did you get the 70 million from?

-- Anonymous, October 16, 2000

About three quarters of the way down a report on UK Share Net, of course #55 mill is in the trust for the financing of the stadium and we effetvely owe NTL to the tune of #9.8 mill, with another #15 on the anniversary of the first payment.

One thing that I found interesting was the reduction in sponsorship due to an agreement with ONE of our sponsors that appears to be position in table related. Who signed that. I guess it would have given us way more money if we finished in the top six, well I bliddy hope so anyway.

-- Anonymous, October 16, 2000

I thought the NTL money was repayble by shares?

-- Anonymous, October 16, 2000

It is but I suppose until it is paid off they have to account for it somewhere and it represents a loan in effect. Or am I misreading this!

Whee's all the financial bods when you need them!

-- Anonymous, October 16, 2000

I'd like to study the figures before I offer any comment, other than to state the blindingly obvious - this looks BAD!

-- Anonymous, October 16, 2000

Can some one put these figures into thick geordies terms, or will I have to wait until the ronnie gill comes out

It seems strange that NUFC buy #20 million worth of players , sell #20 million worth but make a #19 million loss, Aparently it's all Jane Duffy and the SOS lots fault.

-- Anonymous, October 16, 2000

These figures don't include post-july transfer trading.

-- Anonymous, October 16, 2000

What's the impact on the share price

-- Anonymous, October 16, 2000

No change in the share price AT ALL. However, there may have been a slight rise at one point this morning. Man United shares continue to plummet. Now at about 2.42..

-- Anonymous, October 16, 2000

Dougal,

As is usual in these situations, the bad news has already been factored into the share price before the public announcement.
You might well ask how or why? After all there are strict rules governing "insider trading" which dictate who should be in the possession of price sensitive information - so how is that share prices almost always 'react', such that good or bad news is already factored into the price before the public announcement?
You can draw your own conclusion, but in my experience its always Joe Public who suffers - which is precisely who the insider trading regulations are designed to protect.

-- Anonymous, October 16, 2000

Surely that can't be the case this time? Wasn't it a public statement that said the results were going to be delayed? Well, if anybody is into "financial dealing" I'd have thought that they could quite easily guessed that the news wasn't going to be good, and therefore likely to cause a drop in share price. Isn't this one of the "mechanisms" available to warn in advance?

Probably a good time to buy as they'll start to rise tomorrow after a resounding hattrick from Big Al. On the other hand...........

-- Anonymous, October 16, 2000

surely not all that bad. without spending too much time looking at the #s

add back the transfer fee income post july. forget the write down in players value -its not a cash item- back out the legal costs - one time event- hopefully.

factor in that you're servicing the loan for the new stadium before you realize the increase in season tix for 2000 - 2001 and you're left with a drop in replica shirt sales.

the 2001 #s will have the 50,000 crowds baked in the(a 45% ish increase) so they should look ok

yes of course dougal, you have to fill the ground, that's why you built it. don't panic!

-- Anonymous, October 16, 2000

Couple of clarifications:

1) legal costs were essentially unchanged year-on-year at about #600k.

2) the figures announced today DO NOT include the cost of servicing the new debt. This doesn't kick in until 2001, which I take to mean the current financial period. The annual repayment I seem to recall is ca. #7 million per year.

Believe me, there is a lot more to these dreadful results than a couple of million drop in replica shirt sales.

-- Anonymous, October 16, 2000

Hmmmm...this has been bothering me:

>The club also acknowledged that "revenues were undoubtedly >affected by the negative impact of our decision to ask a number >of fans to move to alternative seats."

As Rik said: "it's all Duffy and the SOS's fault then is it?"

Surely this is another PR disaster in the making. M&S don't blame their customers directly becuase of their slump in profits, yet that's EXACTLY what we hear from the board of NUFC.

If revenues were 'undoubtedly affected', why didn't they do something about it when they knew the impact it would have? Our club is being run by monkeys, supported by DIAMONDS.

It just seems a bit sinister that they can blame a MASSIVE drop in profits on the fans...

Sorry to bring a downer after such a glorious night, but, well, it just sends a shiver down me spine....

-- Anonymous, October 17, 2000

I hesitate to contribute to a thread with such a negative title but what the hell.

I really can't understand why it's all of 19m. There's a few bits off for reduced merchandising, reduced sponsorship for a low league position (although the league position was improved on the prior two profitable years) but these are trifling amounts compared to 19m. The newspapers this morning barely comment on the actual magnitude of the loss and the share price is steady as is the traded volume.

So where did it all go? Player trading? I don't understand. My understanding is that a player is bought and then depreciated over the term of his contract. So, for example, Shearer cost 15m and had a 5 year deal. Therefore his value is added to the balance sheet and his cost is 3m per annum in depreciation. We do have a large squad but I've no idea why the loss on player trading should have ballooned to such a huge figure. Except that maybe this is the first year of this accounting policy and thus these depreciation figures are in there for the first time. Do we have no-one on here who is, or is prepared to admit to being, an accountant?

Amidst this apparent carnage, the dividend to shareholders has been increased so the club is clearly not short of hard cash, and has gone on buying players since the period covering these figures. I don't think there is anything to worry about unduly and the few reports I read are unfazed by the results.

Interestingly, the Independent shows a graph of United's share price vs Chelsea's since our float. The two graphs match almost exactly and tend to reflect just how inflated footie shares were when we did float. There are those on here who criticise the board for our lowly share price and yet the board seem to be doing not much better or worse than the other plc football clubs with the obvious exception of Newton Heath.

-- Anonymous, October 17, 2000

Jonno,

There are several issues worthy of comment here by reference to the following figures: (praying html tags are OK!)

Item	2000	1999	1998
Turnover	45.1	44.7	49.2
Expenditure	(44.3)	(37.8)	(38.4)
Operating Profit (before player trading)	0.8	6.9	10.8
Player Trading	(19.9)	(5.5)	(7.4)
Net Operating Profit (before tax)	(19.1)	1.4	3.4

All figures are in millions
Figures in brackets are negative or indicate a loss

Firstly, Turnover has been stagnant to declining for several years. This can I believe be largely explained by the revenue (gate & TV) associated with our CL participation in '98. However, the reality is that the Company is not growing its revenue base, and indeed revenue from non-playing activities is declining - other than TV revenue.

If the benefit of increased TV revenue is excluded, Turnover has diminished quite substantially. IMO this is a significant concern, even though gate revenues will grow substantially this season as a result of the ground expansion.

Expenditure has increased dramatically over the period, and has been entirely out of kilter with the corresponding diminishment in revenue. This has drastically reduced profits.

The difference between Turnover and Expense - call it gross profit - is the total money available to fund player acquisitions, plus all other non-operational costs (eg legal fees, interest payments etc.). In '98 this was 20% of turnover: in the period just reported it was actually less than 2%!

In very simple terms, the business has been spending way beyond its means - a situation that is entirely unsustainable.

In the recent period the overall loss on player trading was a massive #19.9 million - far higher than in the previous two years ('99 was #5.5million and '98 was #7.4 million). This enormous loss will include the specific losses incurred on the sale of Andreas Andersson, Sylio Maric, Alessandro Pistone - and I suspect Duncan Ferguson.

These 'player trading' numbers are lacking in detail and therefore difficult to fully understand. My suspicion is that the #4.1million write-down in 'player value' could be largely attributable to Ferguson, with his 'book value' having been written down at year-end, rather than the Club taking the hit as a transfer fee loss in the current financial year. If so, the club will get the benefit of this action in the present financial period, and I would regard this is sound financial management.

Because the club made a 'loss' of #19.1million it actually attracts a corporation tax 'credit' of #3.4 million - reducing the after tax loss to #15.4 million. However, because the Club has then decided to make a dividend payment to its shareholders that will cost #3.8 million, increasing the "trading loss" that is carried onto the Balance Sheet to #19.4 million.
This has had the effect of reducing the Net Asset Value - or tangible current 'worth' of the company - from #54.5 million at the end of '99 to only #36.4 million at the end of '00.

The bald facts are that the "pigeons have come home to roost" in this set of financial results - which for a plc are truly awful. They clearly indicate that the Company has not been prudently managed over the past couple of years. The year-end position presented while uncomfortable, is certainly not terminal, or indeed unrecoverable.

The positive anecdotal evidence from recent months is that the Company, supported by an experienced and sensible Team Manager, is seriously grappling with the key issues that have been largely responsible for the deteriorating financial position - hopefully this will be reflected in the current year figures.

Given the difficult financial position the company finds itself in, I find it extremely disappointing that they feel it is appropriate to pay ANY dividend to shareholders - let alone an increased dividend - especially given that the majority of the money will find its way into the pockets of management.
A dividend is intended to be a way of distributing profits to shareholders that aren't needed to service the growth and development of the business. A dividend in the current circumstances doesn't pass any test of validity IMO, and I believe the cash should have been either retained in the business or used to reduce the extremely high level of debt.

I hope this proves helpful - as the song said "things can only get better!"

-- Anonymous, October 17, 2000

Thanks for throwing some light on the numbers Clarky, although, like myself you seem puzzled by the losses on "player trading". I would have thought it SHOULD be possible to get an analysis of the figure because the method by which it's calculated is an accounting standard and not a Newcastle invention, and the transfer fees paid tend to be more or less public knowledge. However, I guess it's possible that individual signing on fees are in there as well and they may well be confidential. Several players like Barton, Lee and Shearer for example have re-signed for the club and may get signing-on fees as well I guess.

The lack of any seriously adverse comment in the press sounds promising (The Indy even hinting we were worth a punt) and I hope that the bad news is substantially out of the way. The increased revenue this year due to the larger stadium should help a lot but the absence from Europe will be felt and it's important we get back there this season.

At least the football is now well worth watching after the Gullit and TSM hiatus. The benefits of recent "player trading" are there to be seen and the likes of Cordone, Dyer, Lua Lua are clearly worth more than was paid for them. Several more have not yet had a chance to prove their worth such as Gavilan, Cort, Bassedas. I think we have a great squad at present (which needs further pruning of deadwood) so the future's looking brighter despite the poor financials.

On the subject of the divis you will recall that these were foregone last season with the main shareholders opting for more shares. They may well be thinking of a similar move this year.

I'm sure that the likes of Real Madrid will look at our 70m debt and regard it as kid's stuff. (-;

-- Anonymous, October 17, 2000

From FOOTBALL UNLIMITED: Newcastle pay for Fletcher years

John Cassy and Dominic Fifield

Tuesday October 17, 2000

Newcastle United yesterday revealed Freddie Fletcher, the former chairman and chief executive who quit the club earlier in the year after becoming a hate figure among some fans, had walked away with a #532,000 pay-off. The club said it had racked up a further #647,000 in legal costs relating to the departures of Fletcher and the former manager Ruud Gullit. The costs emerged as United reported they had fallen #18.9m into the red last season. Turnover climbed1% to #45m. Fletcher, 59, was dubbed "the Rottweiler" for the way he stood firm against six fans who claimed that the #500 bonds they bought as season ticket-holders in 1994 should have guaranteed them the same seats for 10 years. Six years into the bond the fans, with 4,000 others, were asked to move to the newly built upper tier of St James' Park to make way for new corporate hospitality facilities. The row led to a high-profile court case. "Last year was a year of immense change but one that is now bearing fruit," the plc chairman John Fender insisted. "There is no doubt that the legal action by a relatively small number of supporters impacted on us. We hope to settle the issue once and for all very shortly." Fender said moves to increase the capacity of St James' Park to 52,000 and the media alliance with the cable television firm NTL should soon improve future revenues. Frank Gilmour, chairman of the Independent Newcastle United Supporters' Association, said: "The whole Save Our Seats issue certainly affected the figures because the club have not been able to sell the seats in question. You can see the empty seats in the corporate areas at St James' Park every week, so they have obviously lost revenue." The football club chairman Freddy Shepherd was yesterday promoted from a non-executive director of the plc to a part-time executive director.

-- Anonymous, October 18, 2000

To summarise most of this, would it be fair to say that the PLC have released many bad points about the club and even down valued some players in order to make next years figures look a bit more rosy.

Lets face it with an increase in attendances expected to be about 30- 40% they should appear more rosy!

-- Anonymous, October 18, 2000

Jonno,

Without appearing to be pedantic, the dividends were not foregone last year. The Company offered shareholders the option of a so-called 'scrip dividend'. This means that additional shares equivalent to the cash value of the dividend could be taken instead of the cash payment.
The Board made a big deal of this saying that the major shareholders (Cameron Hall Dev, Douglas Hall and FS) were opting to accept additional shares instead of taking cash out of the business. Real philanthropists!
It is my understanding that the same is to happen this year, and 'management' may elect again to take additional shares to conserve cash-in-hand.

I have to say that this does not change the view I expressed in my earlier post one iota. To award an increased dividend in a situation where management own the majority of the equity, IMO rewards that management for the delivery of a disastrous set of financial results and the consequent destruction of significant shareholder value.
To compound this felony, the Chief Executive who presided over this calamity has apparently been further rewarded with a #500k golden handshake, the rational for which beggars belief.
In any 'normal' plc - where the public own the majority of the equity - there is little doubt that management would have been 'rewarded' for delivering this level of financial performance by being shown the door.

DB,

Just remember that the first #7 million of any profit arising from the additional stadium capacity will go straight towards pay down the new debt.

-- Anonymous, October 18, 2000

the first #7 million of any profit arising from the additional stadium capacity will go straight towards pay down the new debt

Surely the additional capacity will not give us #7 mill in profit anyway, so does this mean that whatever happens, next year we will have to pay that #7 mill?

-- Anonymous, October 18, 2000

DB,

I'm working from memory, but my recollection is that the annual debt repayment on the #55mm Bond was ca. #7mm per year.
I also seem to recall that FF reckoned they anticipated generating additional revenue of some #15mm per year from the stadium expansion - seat revenue, plus revenue from the new corporate areas, conference suites etc. Let's hope he's right - for once!

-- Anonymous, October 18, 2000

Clarky. A big thank you for explaining this to me. Unfortunately now that I understand it I wish I didn't. Cheers

-- Anonymous, October 18, 2000

Clarky,

I've read that the bond is to be paid off in equal instalments, I suppose starting in 1999/2000 and it will be paid off by the year 2016. So say the term of the bond is 18 years, then the payments will only be around #3 million-ish. Does this sound right to anyone else?

-- Anonymous, October 18, 2000

DB,

The repayment of the principal only (#55mm) over 16 years would be #3.44 million per yr, ie. without interest.
The Club on Monday said the average interest rate on the Bond was 7.43%. Therefore, the first annual interest payment on #55mm would #4.1mm.
So, in this financial year it looks to me as though the repayment due will be #3.44 + #4.1 = #7.54 million.
Naturally, the annual interest due will diminish as the principal is gradually redeemed.

Hope this helps.

-- Anonymous, October 18, 2000

Certainly does Clarky.

-- Anonymous, October 18, 2000

Didn't someone (Dougal maybe?) post a table recently showing the income from gate receipts/season tickets for all the Prem clubs? I vaguely remember it showing that we were gonna double our income from that source with the extra seating....can't remember off the top of my head what the amount was but it was a lot more than 7mill....

-- Anonymous, October 18, 2000

Gav, you're right, our revenue was about 22 mills from gates, more than Man United and Chelsea and about 10 mills more than the SMB.

-- Anonymous, October 18, 2000