Thread by @SwissRamble

Newcastle United’s 2017/18 financial results reflect their promotion after a single season in the Championship. Managing director Lee Charnley said, “A 10th placed finish in our first season back in the Premier League was a fantastic achievement.” Some thoughts follow #nufc

#NUFC promotion brought the club back to “a healthy financial position”, moving from £47m loss before tax to £23m profit, as revenue more than doubled from £86m to a record £178m and no repeat of prior year £32m exceptional costs: £10m promotion bonus & £22m onerous contracts.

#NUFC £93m revenue growth very largely driven by broadcasting’s £79m increase to £126m, reflecting vastly higher TV money in the Premier League, while commercial also increased £13m (90%) to £28m, but match day flat at £24m. However, profit on player sales dropped £39m to £4m.

#NUFC underlying wage bill (excluding the one-off promotion bonus & onerous contracts provision) increased £14m (17%) from £80m to £94m, while player amortisation also rose £6m (16%) to £41m, though other expenses were £1m lower at £24m, due to “prudent financial management”.

#NUFC were one of 13 Premier League clubs to report a profit in 2017/18. Although their £23m profit before tax (£19m after tax) was pretty good, it was actually only the 9th highest in the top flight, a long way below #THFC £139m, #LFC £125m, #AFC £70m & #CFC £67m.

#NUFC profit was restricted, as they only made £4m from player sales (mainly Hanley, de Jong & Murphy), compared to £42m prior year (Sissoko & Wijnaldum). This was one of the lowest gains in the Premier League, in stark contrast to clubs like #LFC £124m, #AFC £120m & #CFC £113m.

#NUFC have been profitable in 7 of the last 8 years, the only exception being the Championship season in 2016/17, amounting to £79m. Since Mike Ashley bought the club in July 2007, Newcastle have had total profits of £27m, as there were £53m losses in his first 3 years.

Looking at the last 8 years, #NUFC have posted 6th highest profits in England of £79m, despite the chunky £47m loss in 2016/17. As might be expected, highest profits came at #THFC £324m, #AFC £199m and #MUFC £185m. The Toon Army would like to see more of that money on the pitch.

Part of #NUFC profit improvement was due to the elimination of exceptional charges. There was £29m for “mismanagement” 2007-11, then nothing for 5 years until £22m onerous contracts provision in 2017, which obviously inflated the reported loss that year (though no cash impact)

Over the years player sales have had a decent impact on #NUFC profits, contributing £184m during the Ashley era. That said, only 3 years were above £20m. If such profits were excluded in 2017, the loss would have been as high as £89m. This year will include Mitrovic and Merino.

Excluding exceptional items, #NUFC EBITDA (Earnings Before Interest, Depreciation and Amortisation), which strips out player sales and non-cash items to give underlying profitability, improved from minus £20m to a record £61m, almost double the £32m from the last time in the PL.

As a consequence, #NUFC EBITDA of £61m is actually the 7th highest in the Premier League, only below the “Big Six”. They are within striking distance of #AFC £78m, but only a third of #MUFC incredible £177m.

#NUFC £178m revenue is £53m higher than the last season in the Premier League (2016/17), entirely due to the new TV deal that started in 2017. It’s the same story since Ashley’s arrival in 2007, as revenue has grown £91m, but £101m is from centrally negotiated TV contracts.

On the one hand, #NUFC £178m revenue is the 8th highest in the Premier League, only behind the Big Six and #EFC £189m, but on the other hand they are a long way below the leading clubs, e.g. around half of 6th placed #THFC £381m and less than a third of #MUFC £590m.

#NUFC returned to the Deloitte Money League Top 20 for the first time since 2014/15, as they had the 19th highest revenue in the world of £178m, just behind Milan £184m, but ahead of Napoli £162m.

Before Ashley’s 2007 takeover, #NUFC had the 14th highest revenue in the world, just £19m lower than the 10th placed club. In 2018 this gap has soared to £201m, around 10 times as much, as the club has been left behind by others’ growth.

#NUFC £126m broadcasting revenue was the 8th highest in the top flight. Here, European qualification makes a big difference, e.g. Newcastle’s domestic revenue was only £20m below #LFC, #CFC and #THFC, but they earned £72m, £58m and £53m respectively from the Champions League.

#NUFC received £123m from the Premier League in 2017/18, three times the prior year’s £41m parachute payment. This was the 8th highest distribution, even though they finished 10th in league, due to the club’s popularity, as facility fees were boosted by being shown live 18 times.

#NUFC have only qualified once for Europe under Ashley, earning just €5m in 11 years. In contrast, they qualified in 10 of the 13 years before he became owner, including 3 times for the Champions League. As an example of what they could have won, #THFC got €128m in last 3 years

#NUFC (limited) objective is “being a member of the Premier League”, which is to an extent understandable, given that 71% of their revenue comes from TV (£126m of £178m). That said, the only club outside the Big Six with a lower reliance on TV is #WHUFC and 7 clubs are above 80%.

#NUFC match day revenue rose slightly by £0.5m (2%) to £23.9m, despite hosting fewer home games in the Premier League than Championship, as attendance increased from 51,108 to 51,992 (just below capacity). This is the 8th highest in the top tier, only behind Big Six and #WHUFC.

Not only is #NUFC £24m match day revenue lower than the last time in the Premier League in 2016, but it is also nearly a third less than the £34m in the last season before Ashley’s arrival. Others have surged ahead in this period via stadium developments or success on the pitch.

As testament to #NUFC fans’ loyalty, the 2018 average attendance of 51,992 is the highest since 2006. The previous season, they averaged a very impressive 51,108 in the Championship. Ticket prices were cut by 10% following relegation, then frozen in the following campaign.

#NUFC attendance of 51,992 was the 8th highest in the Premier League, but fans are unhappy with prices rises of up to 20% this season, though there was no increase for around 20,000 with long-term season tickets that have no price increases for 10 years.

#NUFC commercial income nearly doubled from £15m to £28m, as performance-based clauses were triggered by promotion. Comprises commercial £26.7m (including central PL sponsors) & other income £1.4m. This was the 9th highest in top flight, but way behind the elite clubs.

Ashley has only managed to grow #NUFC commercial income by £0.5m in 11 years, so the club has fallen way behind rivals, e.g. Big Six have grown by £65-220m in that period. Accounts say that Sports Direct will now pay for stadium advertising, but similar promise was made in 2015.

#NUFC had a new shirt sponsor, Fun88, in 2017/18 with a deal worth £6m (up to £6.5m in 2018/19) plus first sleeve sponsor with MRF Tyres. Puma have been the club’s kit supplier since 2010. Last season benefited from Magic Weekend and Ed Sheeran events.

#NUFC reported wage bill fell £18m (17%) from £112m to £94m, but this is a bit misleading, as prior year included £10m promotion bonuses and £22m onerous contracts provision. Excluding these once-offs, underlying wage bill increased £14m (17%) from £80m to £94m.

#NUFC enjoyed the 5th highest wage bill in England before Ashley bought club in 2007, but since then this has risen by just £34m (57%) from £60m to £94m, while others have increased wages by significantly more, e.g. #THFC up £104m (237%) from £44m to £148m.

As a result, #NUFC £94m only had the 14th highest wage bill in England in 2017/18, around the same level as the 3 relegated clubs (Stoke City £94m, WBA £92m and Swansea City £91m). Much lower than #EFC, #LCFC, #CPFC, #SaintsFC, #WHUFC and even #AFCB.

Normally, the largest year-on-year % growth in PL wages is from clubs promoted from the Championship, and 2017/18 was no different in the case of #htafc 188% & #BHAFC 148%, but #NUFC were the exception to the rule – only 17% (though prior year was highest ever Championship wage).

#NUFC reported wages to turnover ratio fell from 131% to 52%, but after excluding once-off factors, the reduction is from 94%. In any case, Newcastle’s ratio is the 5th lowest in the Premier League. This is nothing new, as they have maintained a 50-60% range in last 4 PL seasons.

The remuneration for #NUFC highest paid director (presumably Lee Charnley) doubled from £150k to £300k, but this is still one of the lowest in the Premier League. As a benchmark, Karren Brady at West Ham (similar revenue) received almost 3 times as much (£898k).

#NUFC player amortisation, the annual charge to expense transfer fees, rose £6m (16%) to £41m, the highest figure ever reported by the club and more than 3 times the £13m charge in 2013/14. This is a reflection of higher transfer spend in the last 4 years.

Following this steady growth, #NUFC player amortisation of £41m was 11th in the Premier League, though still shy of #LCFC £48m and #CPFC £46m. For some more perspective, big-spending #MUFC £138m and #MCFC £134m are more than 3 times as much.

#NUFC spent £51m on player purchases in 2017/18, including Murphy, Lejeune, Atsu, Merino, Joselu & Manquillo. This means they have spent £207m in the past 3 seasons. All well and good, but Newcastle still had the 3rd lowest spend in the PL last season, only above WBA & Burnley.

#NUFC were at pains to justify their transfer spend and it is true this has tripled in the last 4 years to an annual average of £55m. However, this is still a lot less than leading clubs. Average net spend over the entire Ashley era is a measly £13m.

It is also telling that #NUFC only broke their 2005 transfer record (£15m for Michael Owen) in January 2019 when they bought Miguel Almiron for £21m. It doesn’t look as if the leopard will change its spots any time soon, as the accounts note net spend after year-end of just £6m.

#NUFC debt was reduced from £152m to £145m, almost all (£144m) owed to Mike Ashley, as the £8m bank overdraft was eliminated. The owner’s additional £10m cash injection was repaid during the year, while a further £33m was also repaid after year-end, leaving £111m.

#NUFC said that Ashley considered the remaining £111m debt “to be long-term in nature, having been in place for over a decade, and repayable only in the event of the sale of the cub.” However, unlike many owners, Ashley has not converted any debt into equity.

#NUFC £144m debt is almost twice as much as £77m Ashley took on in 2007, including £58m mortgage for stadium development, and is the 7th highest in the Premier League. In addition, an overdraft facility was taken out in January 2019 in advance of Premier League TV money payment.

#NUFC used to pay all transfer fees upfront, but now owe £28m. On the other hand, they are owed £43m by other clubs, which the board has noted does have an impact on Rafa Benitez’s transfer budget, as the cash is not immediately available.

#NUFC only paid £37k interest in 2017/18 (on the overdraft), as Ashley’s loans are interest-free. In fairness to Ashley, the switch from external bank debt to owner financing has saved a lot of money in annual interest payments (as high as £8m in 2008).

#NUFC moved from an £8m overdraft in the Championship to a £34m cash balance in the Premier League. This was actually the 6th highest in the division, but was essentially just enough to repay Ashley’s short-term £33m debt – a fortunate coincidence for the owner.

#NUFC generated £59m cash from operating activities in 17/18, spending a net £16m on players and £1m capex, meaning a £42m improvement in cash balance. As Charnley observed, “Turnover less our wage bill and other operating costs, broadly speaking, gives us what we have to spend.”

During Ashley era, his £144m loan provided around half #NUFC cash with remaining £129m from operations. In the early years, £82m was used for bank loan/interest payments, but most since then has been spent on the squad: £144m in 11 years. Only £10m invested in infrastructure.

Ashley has been looking to sell #NUFC for some time, but apparently his hefty asking price has put potential purchasers off. From a purely financial perspective, he’s run the club well, but the chronic lack of investment has clearly hampered Newcastle’s prospects.

Charnley concluded, “These positive financial results give the club a strong platform on which to build”, but manager Rafa Benitez cautioned, “We need a team that can compete in the Premier League and not just survive” in a far from subtle plea for a decent transfer budget.