To spend or not to spend, that is the question

It’s been almost a week since the club released the statement we’ve all now read. The one which says there’s “no plan for new capital outlay on players”.

Initially I didn’t post about it because it was as much as I’d expected. We’ll not be spending any money on players. Ashley wants at least some of his money back first. While I wasn’t pleased to have it confirmed, I accepted “the club now feels that it is the correct time to send a clear message to its magnificent supporters who have kept faith with the club”. I didn’t really see any great contradiction between the content of the statement and anything they’d said before.

Then the club followed it up with a much shorter clarification to make “it clear that owner Mike Ashley is not looking for his interest free loan to be repaid, or to take any money out of the Club”.

If this is the case then I’m afraid the numbers just don’t add up and rather than making anything clear they’ve only muddied the water. There isn’t a single fan i’ve spoken to who can fathom the owners intention.

They intend “to ensure that the club is run at a “break even” manner by the year 2015/2016″. Initially I assumed they meant the club would be debt free. However the extra statement makes it clear that was not the intention.

Given that £37.7 million was lost in 2009 and £32.5 million is the expected loss for 2010, it’s clear that the club intend to keep reducing yearly losses by about £5.4m every year to break even in 2016:

2009 = £37.7m loss
2010 = £32.5m loss
2011 = £27.1m loss
2012 = £21.7m loss
2013 = £16.3m loss
2014 = £10.9m loss
2015 = £5.5m loss
2016 = £0.1m loss

In order for the accounts to be signed off, Ashley will be forced to put the money into the club to cover those losses, every year. So by 2016 Ashley will have invested a further £81.6m.

However, with a clear statement that there will be no “capital outlay” on signing players, I can’t see how such losses are projected.

In 2008 our accounts said Premier League TV income was £41m. The new deal is a 5% improvement on that.

The current Championship deal provided us £5m at best. Take away the £12m parachute payment and we’ll still be at least £24m better off next season than we were last. Then you can add on any extra revenue from sponsorship, Puma and the two new kits that are about to be released (or is it three?).

The only way we can possibly lose just £5m less than we did last season is to use £20m of the additional income for something. Which leaves 3 possibilities

1. We’ll spend £20m on players each season and Ashley will cover the reducing losses as turnover improves….but that contradicts the “no further capital outlay” statement.
2. We’ll spend £20m on clearing the bank overdraft…but that only explains year one. Once that is paid there is no other debt remaining (other than to Ashley) so we should start to turn a profit ahead of plan.
3. We’ll spend £20m on covering Ashley’s loans….but why would Ashley put his own money in only to take it out again? That’s basically the same as breaking even next year…which also contradicts the 5 year plan, and the statement that those loans are not being repaid.

Of course, my assumption throughout this post has been that the plan is based on staying in the Premier League.

It’s taken me this long to realise the plan is to avoid a loss even if we get relegated back to the championship.

A plan for failure.

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