Club too much of a drain on Ashley's resources

Jun 2 2009 By Peter McCusker, The Journal

THE expensive business of running a football club may be just too much for Mike Ashley after seeing his £2.2bn fortune shrink by two-thirds in the last two years. Peter McCusker reports.

Earlier this year two senior Newcastle United figures shed some light on Ashley’s financial position.

In February Derek Llambias Newcastle’s managing director, while reiterating that Ashley is still a "billionaire" stated the value of Ashley’s interest in Sports Direct had fallen from £2.5bn to £200m (the share price at the time was around 60p compared to last night’s 86p).

And this came after comments from the then manager Joe Kinnear, following the defeat to Manchester City in January.

He said: "The credit crunch is killing us. Mike has lost £2bn in his own businesses and shares. He is just about paying the wages but it is not an easy situation."

Ashley spent £134m buying Newcastle in the summer of 2007 and on purchasing the club he then had to immediately repay a £70m loan to the banks. This and other commitments saw Ashley lend the club £100m.

In February Llambias also said that operating Newcastle cost Ashley £34m in 2007, and £20m in 2008.

Vinay Bedi, divisional director at Brewin Dolphin in Newcastle, believes Ashley has got to the point where it is now too much of a drain on his resources.

"He has made a significant commitment to the club, with the amount of money he has already spent from his own pocket," he said. But I don’t think he realised just how much he would have to keep spending on the club, with transfer fees and wages, and he has now realised that there is not the cash flow in the club to meet these commitments.

"He’s realised that the pressure will always be on him to find extra money for transfers, and even just to run the club, and I think I think he’s decided he just does not want to spend any more money on Newcastle."