Newcastle United reportedly require circa £25m in player sales or additional revenue through new sponsorships, to avoid non-compliance with PSR/FFP before the 30th June 2024.
So why are they interested in spending £25m on Dominic Calvert Lewin and why are Everton claimed to be showing an interest in Minteh at a similar price.
Newcastle paid £6.5m for Minteh on a five year contract – the amortisation cost will hit the profit and loss account at £1.3m per year, so that is what he is costing us towards FFP in the accounts to be submitted on the 30th June.
However, if he is sold for lets say £26.5m, that would give us a profit of £20m, still not enough to cover the PSR black hole (that is assuming it is £25m). We are still £5m short. Everton are claimed to be hoping to get £20m for Dominic Calvert-Lewin, who they only paid £1.5m for back in 2016.
They have their own black hole to fill, but fortunately for them, Dominic Calvert-Lewin is entering the last year of his contract so most of his original fee will have been written down in the accounts already.
A sale hits the profit and loss account as revenue ie income on the day the contract is exchanged, but the asset is amortised over the length of the contract, the asset then sits on the balance sheet and its value reduces by the amortisation cost each year until fully depreciated. Also, as we are entering the last few days of the financial period, it would mean that the amortisation for any new signings would be pro rata for the financial period, so a minimum amount to virtually nothing, especially if the deal is concluded on the last day.
Rumours are that Newcastle are looking for £40m for Minteh, and that Everton want £37m for DCL, it could be argued ,way above their actual true worth (Associated Party Rules don’t apply here), if an agreement is reached to inflate the actual transfer fees on both sides, this means that Newcastle and Everton could maximise the profit and completely fill their respective black holes in one transaction.
Ie If Newcastle receive £36.5m the black hole is filled (assuming it is £25m or not much mor) – however the amortisation costs are higher going forward for the buyer – but if spread over five years – it would only equate to Circa £2m extra per year. It provides a way to keep kicking that can down the road in a similar way Chelsea did by offering eight year contracts, for which the Premier League closed that loophole.
Problem is that certain players will not be sold in time due to Copa America participation and the fact that the Saudi League Transfer window doesn’t open until after the 30th June cut off, so sales of the likes of Almiron, Wilson and possibly Trippier, will not impact on the PSR/FFP for 23/24 unless sold to a European or EPL club this week.
Re new commercial deals, I think these will be delayed until after the Man City challenge with the Premier League re Associated Party Rules. Why would you not wait until this is clarified to enable contracts to be agreed without assessment of fair market value.
There is talk of a new training kit sponsor and we are still waiting for a sponsor to be announced for the new training ground.. so why would you not wait to maximise these sponsorships on the outcome of Man City’s challenge.
Its going to be an interesting few days…
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