Newconomics: Interest payments 75% above transfer spend


Celtic net financing cost £201k (interest paid minus interest earned), Newco net finance cost £2.997m, that’s 6.25% of their income paying for previous season’s spend.  This percentage is a key metric for distressed companies.  David Murray’s Rangers paid 7.7% of their income in finance costs 19 years ago.  That was clearly unsustainable.  Rangers subsequently converted loans into shares (sound familiar) but were unable to apply a tourniquet on the losses, which eventually led to liquidation.  Newco are walking the same path.

Celtic and Newco both had a reduction in income, minus the reduction in costs due to the lack of fans, of around £9m. Newco state this net loss at “over £10m”, which gives an indication of what they will present in reporting to Uefa.

If we correct the reported losses for the 2020-21 exceptional items, Celtic’s loss is reduced to £2.3m, Newco’s to £14.5m.  The sale of Bayo and Hendry more than covered that trend loss for Celtic, leaving income from the sale of Edouard, Ajer and Hendry for new signings.  Newco’s entire transfer income was £1.7m.  They pay 75% more than this in interest.

When I started writing here about Asset Management, the moans came back about becoming ‘a selling club’.  If you are not selling players at the right time, for the right fee, something else is picking up the pain and you are underachieving.

Signing the finished article is more likely to help you succeed in the short term (although loanee Shane Duffy was 28 when he arrived), but the return on your investment from players purchased at that age is likely to be low.  They have been around long enough for their perceived values to be fixed.  When performances drop, you cannot move them on at a profit and need to cut elsewhere to replace them.

Sales from a hugely underperforming Celtic squad took in £34m transfer fees this summer.  20 times more than Newco’s £1.7m from a title winning squad.  And let’s be clear: before the summer they acknowledged they needed to sell, an admission their accounts confirm.

There is a trade-off: the instant hit or a more strategic play.  Strategic players win more often, that £34m has been transformational to what Celtic have been able to do this season.

How much of your income to pay to service debts inhibits what you can spend going forward.  Not all spending is equal.  Some will perform long-term, providing reinvestment funds after the player has moved on.  Others not so much (we have been there, think of the £6m signings of Sutton, Hartson and Lennon and the chasm when they aged).

Dave King clearly felt slighted by the tone of Newco’s accounts and responded in The Herald today, when he confirmed his £5m loan, plus £832k interest, had been repaid a little over a week ago.  There was an insistence that despite King, Douglas Park and others (let’s call them the Concert Party) saying they would provide interest free loans to the club without taking security, the South African authorities would only allow him to give Newco loans if they were at a commercial rate of interest – 8%, if you don’t mind.

I have no reference point for this kind of insistence.  He does not elaborate on what “authorities” we are talking about, but he has a bit of form in South African, so is perhaps wise to not be too specific and do what he is told.  He also reiterated his pleasure that “the authorities” allowed him to make the loans unsecured.  They sure are involved authorities.

The secured, interest paying, loans from others in the Concert Party clearly irk King, always a man of his word.

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  1. You’d imagine that any new Sevco manager will not seek to reinvent the wheel mid season. He’ll call the senior players in, discuss training and keep things pretty much as they are – much like Lennon did when he came in for Rodgers.



    Rodgers absence wasn’t really felt until 12 months down the line. I suspect we’ll see the same at Ibrox so I’m expecting a close title race this season.



    I’d caveat that by saying I’m assuming they won’t off load players in January.

  2. I’m sure this site is being infiltrated with Newco Supporters,all this talk of King and Gerrard,and how much debt they are in,I’m not interested it’s there business,I’m just interested in all things Celtic Football Club,like the news of a major Development about to happen at Barrowfield Training Ground ,on other developments ie Hotel,Musuem,Ticket Office,personally out off the 3 I hope the build a bigger Ticket Office,oh I forgot a big upgrade on the Superstore.

  3. My Birthday is this month,my family asking me what they could get me ,I replied with saying I wouldn’t mind some Shares in Celtic,which they came back and said that’s a good Birthday Present,One of them came back and asked Papa how do we acquire them ,I said I really don’t know,I would be grateful if some of you Bhoys and Ghirls could advice us were to purchase some Shares.

  4. Camusbhoy



    stay positive and as some would say, Keep the Faith, that you will get through this


    Wishing you every success with the treatment



    Hail Hail

  5. Back to Basics - Glass Half Full on

    Out all day.



    Came back to a cuppa and a very enjoyable read of CQN.



    Brilliant leader Paul.



    £3m to service debt in just one year?



    This bit cracked me up as did PeterLatchfordsBelly’s response.





    He (GASL) also reiterated his pleasure that “the authorities” allowed him to make the loans unsecured. They sure are involved authorities.





    I wonder why the intrepid hack didn’t pause from his or her CTRL-C / CTRL-V duties ..



    … and simply ask the “glib and shameless liar” if he planned to return the £832k ?

  6. Back to Basics - Glass Half Full on

    Their fans will swallow anything.



    Including the false premise they’d secure successive champions League slots thus providing access to 2 x £20/30/40/50m


    (delete as per your level of delusion)



    Never mind.



    The relatively new prize money payment of €5m euros for falling at the final group qualification stage will come in very handy.



    All Sevco need to do to receive this is beat Malmö.



    WHOOPS !!!!

  7. TIMBHOY 163 @ 4:41



    If your horse always runs in a two-horse race and you don’t take a close interest in how the other horse is performing, especially when it has just beaten you despite the many obvious & serious financial failings of its owners, wouldn’t that be seen as wilful neglect?



    If your opposing owners were not breaking the law and being successful using their high-risk methodology, wouldn’t you be inclined to look at your own business strategy on order to counteract?



    Would sticking to your traditional solid business model, even though it did not deliver success, be the right thing to do?



    Would you ever consider modifying your long-standing risk-averse approach to business in order to get back on top?

  8. “Sales from a hugely underperforming Celtic squad took in £34m transfer fees this summer. 20 times more than Newco’s £1.7m from a title winning squad. And let’s be clear: before the summer they acknowledged they needed to sell, an admission their accounts confirm”



    Excellent, well done Celtic! Even more so when you consider those we sold had already thrown the towel in.

  9. Good luck Camus, hang in there and listen to the experts.



    Re slippy going tae Villa Park, a club I have always had time for. I will be glad tae see the back of him as he’s a loud mouth bully and has kept fat boy in the game longer than he should have, sine died if it wisnae for the scouse mouth piece.



    As for why he’s going, if he does, let’s not forget what happened tae us when Brian Quinn announced it would be life in the slow lane for the immediate future, by the time the summer was almost over MON was being unveiled down at Villa Park.



    MON never reached the heights he did for us again, not even with his boyhood heroes Sunderland,

  10. TIMBHOY163 on 10TH NOVEMBER 2021 4:41 PM




    So you can buy shares online through a share dealing account – they’re held for you by your stock broker but you are the legal owner. Because the shares are held by your stock broker, ordinarily you won’t be on the share registrar and won’t be able to participate in the AGM.



    I suspect you’re after a share certificate to nail to the wall and so you’ll need to set up a certified share dealing account. Very few trading platforms offer this service now because it’s cumbersome but I believe computershare still do. Once you have your cert, get your name on the club’s registrar and you’ll be able to attend AGMs and vote. You’ll pay more for this option rather than going down the share dealing account line.

  11. Openly, delighted that the odious Steven Gerrard appears to be leaving the new rivals, a nothing manager on the brink of exit but for Covid.



    A ‘big’ name in England his playing reputation spread via SKY and BBC’s questionable coverage, when in fact very few legendary players make great managers ( Lampard, OGS, Bruce, to name a few ) Much more harmful than his exit, is the psychological harm to his squad, all manacled to their contracts, with not one viable offer made in his time at the Penniless Arcade. More harmful than that, he’s taking the kitchen sink in football terms, and backroom staff can’t be replaced overnight, never mind hit the ground running.



    A welcome boost for Celtic’s handicapped league challenge.

  12. Watching Ange on Celtic TV talking about his Manager of the Month award,



    thats the type of man we need in charge, calm, confident, considerate, articulate, clever etc, very impressive,



    if he had been brought in immediately after 9 in a row I thinks we would have got the 10,



    just as I think Stevie G will now know the game is up now that we have a proper manager in charge,



    remember Neil saying last season – think it was against Ross County when they turfed us out of the league cup…



    “I just don’t understand it, its almost as if the players have run out of ideas”



    Could never imagine Ange saying any such thing.

  13. With all the Villa talk, I am reminded of the two games I attended there with Scotland in euro96.



    Great stadium with cracking views, good ingress and egress (think we used a train to get there).



    Best part was the Hotel attached to the stadium. Big beer garden which took loads of us and even had a ceilidh band on for a party post match.



    Soft spot for them ever since




    That awkward moment when the manager is leaving and their lawn mower gets repossessed.






    That awkward moment when the manager is leaving om the motorisied lawn mower



    allys gardening and co

  15. Would sticking to your traditional solid business model, even though it did not deliver success, be the right thing to do?





    itis not the traditional football business model.


    that would be the spend everything borrow from any source at any price, go bankrupt, rinse and repeat.


    any number of examples.



    when was the last time that the celtic plc did not have BUSINESS SUCCESS ?

  16. STEVIE G has put them off the scent by arriving at euston, which is london not brum.



    however a confused Stevie was seen heading for the taxi rank and asking how far to villa park, i missed me stop.

  17. Saint Stivs



    I was on a ‘pay day, away day’ in London once and missed the last train



    Asked a black cab driver to drive me to Derby



    Short conversation 😎

  18. oh ma achin sides, superb call william.



    see at the em oh the day he has won wan trophy oot a nine,

  19. @aboutceltic | Eddie Howe on Celtic



    “I couldn’t get my team to go for a host of different reasons.”



    “I didn’t want to take a job of such size, knowing the job needing to be done, on my own.”



    “I knew what was needed. So there was no change of mind, I was open and honest with the club.”

  20. An interesting talk-sport on sunday morning the fella Johnny Owen is the best they have,



    He talked Villas history, I knew some of the big scottish influence in their early teams and organisation, including red lion rampant on their shirts. He did suprise me that William McGregor, also scottish but the english leagues founder akin to our own john o’hara, influenced a change in colours in the 1880s for a blue of rangers, and a claret of hearts.



    How true this is i dont know, but it makes me despair more that John McGinn went to them.

  21. …………..Celtic were absolutely brilliant. No problems with Celtic whatsoever.”



    – Eddie Howe

  22. TIMBHOY 163 @ 4:41


    Sorry, in my reply to you I meant to preface that I do fully understand where you are coming from and, in a perfect world what goes on a Ibrox should be of little interest to us.



    However Scottish football is far from perfect and we’ve beeb bitten before. If we were in the EPL, or, even the English Championship, the fate, and/or, the modus operandi of one particular club would not concern us.