NEWCASTLE fans are dreaming of a new golden era if Saudi Arabia’s Crown Prince Mohammed ends Mike Ashley’s reign.
But while the Toon Army is desperate to start a victory march, Newcastle also have to meet the Premier League’s “profit and sustainability” regulations.
Newcastle will spend big under new ownership – but they can’t go overboard
While the Prem demands and restrictions are much less severe than Uefa’s Financial Fair Play rules, it does not mean Newcastle would be given the green light to “spend, spend, spend” with no limits.
The Premier League allows clubs to record losses of £105m across three seasons – £35m per year – as long as the owners are able to support them.
They also mandate that wages only rise by a total of £7m per season – enough to pay for the right leg of a top 20-goal a year striker, up until Christmas.
In contrast, Uefa allows losses of just £39m over three seasons – or £13m per year.
As the sovereign wealth fund representing one of the richest countries on the planet, Saudi ownership would see such losses as little more than loose change.
Those losses do not include any money spent on stadium projects or training ground improvements – they are seen as discounted costs.
But they do apply to losses on transfers and wages, where fees must be declared and full results posted at Companies House.
So how can Newcastle really embark on the sort of big money splurge to get them back into the Prem elite?
The key is income – from whatever sources.
A successful Newcastle would, in the long term, benefit from increased broadcasting revenue from the Premier League and, eventually, Champions League.
Winning the Prem is worth around £160m, with up to £100m extra possible if teams go all the way in Europe’s senior competition. Indeed, even a deep Europa League run can make £40m.
But that is a long way down the line for Newcastle as they are now, even if Steve Bruce has started to quieten some of his loudest doubters.
So the quickest fix is improving the income stream, through gate receipts and, most importantly, sponsorship.
The most visible sign of any change would be on the first team strip.
Newcastle’s Prem rivals are already suggesting they expect to see the Aramco logo – the Saudi Arabia Oil Company, with a net annual income in excess of £100billion – replacing Asian gambling company Fun88 on the club’s shirts next season.
ST JAMES’ PARK NO MORE?
A renaming of St James’ Park, as part of another long-term and valuable naming rights deal, is also expected.
The issue, though, would be the valuation of the deals – and who was actually paying for that or other sponsorship contracts.
Uefa found PSG had grossly over-sold its various sponsorship rights to companies linked to their owners, Qatari Sports Investment – part of the gulf state’s government and business arm.
Manchester City, on the other hand, are being investigated by Uefa – if not the Prem – over allegations that sponsorship deals with Abu Dhabi companies were no more than a cover for investment by owner Sheikh Mansour.
While Uefa regulations only become relevant if Newcastle qualified to play in continental competitions, Prem chiefs would be put under pressure from other clubs to ensure any Toon deals were above board and “fair market value”.
Spurs are holding out for a naming rights deal for their new 62,000 home worth in the region of £20-25m per year.
Newcastle would struggle to legitimately claim their naming rights were worth double that, for example.
But the new owners would doubtless seek to argue that any other deals struck were “arms length” contract, entered into by the boards of those companies, and not at the direction of Crown Prince Mohammad. Proving otherwise might be tricky.
Even so, with no disrespect to the squad at Bruce’s disposal, it will take a substantial revamping, at a cost in excess of the £340m offer price to Ashley, to turn this Newcastke team into top six challengers, let alone competitors for the big prizes.
And big transfers mean big wages – even more so when you have to sell a vision and a club in England’s north east corner.
The good thing is that all transfer deals are “amortised” for financial consideration, while sales have a full book value immediately.
So, for instance, if newly-minted Newcastle paid £60m for Real’s Karim Benzema, and put him on a nominal five year deal worth £120,000 per week, the official annual outgoing would be £12m in fee plus £6m in wages.
Whereas, selling Sean or Matt Longstaff for £30m would see the whole amount go into the income side of the accounts ledger.
It suggests Newcastle would have to offer long-term deals even to players likely to only spend 18 months at the club, defraying the outgoing side of the accounts books.
Ambition is good, of course. Crown Prince Mohammad is not the sort to play at anything. He will want to go big.
The regulations mean we are not in the position we were when City began their ascent in 2008, let alone the position when Roman Abramovich bought Chelsea in 2003.
It is far, far harder now.
And it will take some creative accountancy, alongside great recruitment and management.
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Source: Soccer - thesun.co.uk
