Newconomics: Interest payments 75% above transfer spend

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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. Talk of GVB as a replacement will certainly appease the mob but in reality what do they have to offer him ?

     

     

    He’s out of work but he’ll undoubtedly want to strengthen the squad and be backed as equally as Gerrard was – that won’t happen.

     

     

    GVB will go nowhere near them. It’ll be a low key appointment because any decent coach or big name will want backed.

  2. bigrailroadblues on

    Good morning all from Shawlands. Sleazy Gee on the lookout for unconscious brummie djs to wallop. Lowlife.

  3. Super Sally quite miffed at the “lack of manners shown by Gerrard” . Dignity & Manners FC.

     

    BazzaFud can’t believe that the compo is not the same as we got for Rodgers. Someone should take BazzaFud aside and explain that the devil is in the contract detail. On second thoughts, don’t waste your time.

     

     

    Their want-a-ways will be raging. And we all know how that will play out.

  4. DAVID66,

     

    Thanks my good friend, I hope that you are feeling better.

     

    Get yourself fighting fit asap….not for fighting….for a right good bevvy !

     

    LOL

     

    HH Mate.

  5. Alex Rae would be ideal as the Huns manager….not because of any talent….but he looks like ” QUARK” !

     

    That mob are SO Feckin UGLY !

     

     

    hh.

  6. Big Georges Fan Club - Hail, Hail, Wee Oscar on

    TURKEYBHOY mentioned the Maeda video, and I see a few of you bhoys have watched it.

     

     

    For any others who haven’t, and ease of reference – and amid the SG hilarity – I’ve re-posted it here. I’d recommend you all have a look at this boy – looks like a cracker – Daizen Maeda (5’8” for all you height-enthusiasts).

     

     

    As I mentioned last night, he would be amazing in this Celtic team. Honestly – please have a look – it’s impossible not to be excited at the prospect of seeing him in the Hoops.

     

     

    https://www.youtube.com/watch?v=tRJJgxt2Bcc

     

     

    (Unless, of course, all of your attention is spent on drooling over GG – and I don’t mean the impending new Greek Ghod that is Γιώργος Γιακουμάκης).

     

     

    HH

     

    BGFC

  7. Big Georges Fan Club - Hail, Hail, Wee Oscar on

    TEABHOY on 11TH NOVEMBER 2021 11:25 AM

     

    £4.5 mil In compensation (Allegedly) That’s only half of what we received for Brendan and slippy is the greatest manager in the history of football Ever Ever Ever. Shoorly the decimal point is in the wrong place

     

     

    ===========================

     

     

    Good spot TEABHOY – you are bang on.

     

     

    £0.45 mil is probably about right

     

     

    HH

     

    BGFC

  8. Gerrard to Villa and Rodgers to Leicester, once again it reveals the absolute fantasy of football fans to believe that their clubs are so entrenched into the hearts of their managers and players. Nothing could be further from the truth, nothing. Sure, they are committed to doing their very best whilst in employment, but to assume that they have an emotional attachment to the teams they work for is way off the mark. It is all about the money with these people! It is only the supporters who have this emotional attachment, no one else, no one! por cierto.

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