Thread by @SwissRamble

Newcastle United’s 2018/19 financial results cover a season when they finished 13th in the Premier League, 3 places lower than the previous year. Steve Bruce replaced Rafael Benitez as manager after the season ended. Some thoughts in the following thread #NUFC

#NUFC profit before tax improved by £18m from £23m to £41m, very largely due to profit on player sales surging from £4m to £25m, as revenue dropped £2m (1%) from £178m to £176m. There was minimal expense growth of just £1m. Post-tax profit increased from £19m to £35m.

The largest #NUFC revenue decrease was broadcasting, which fell £2.5m (2%) to £124m, mainly due to the worse finishing place in the league, though commercial was also down £0.5m (2%) to £28m. In contrast, match day rose £0.9m (4%) to £25m.

#NUFC wage bill rose £3m (3%) from £94m to £97m (though excluding accrual movements, underlying wages actually fell £3m). Depreciation also rose £0.9m to £3m. However, player amortisation decreased £2.7m (7%) to £39m, while other expenses were down £0.7m (3%) to £23m.

#NUFC £41m profit was the third highest in the Premier League, only surpassed by #THFC £87m and #LFC £42m. This was particularly impressive, given that no fewer than 9 clubs posted a loss, including two above £100m, namely #EFC £112m & #CFC £102m.

The main driver for #NUFC improved profit is player sales, which significantly improved from a very low £4m to £25m, including Mitrovic to Fulham, Merino to Real Sociedad, Mbemba to Porto and Sels to Strasbourg. This was 7th highest in the Premier League.

#NUFC made money in 8 of the last 9 years, the only exception being the Championship season in 2016/17. This amounted to £120m profits, averaging £13m a year. This is impressive from a financial perspective, though the Toon Army would have liked to see more of that on the pitch.

The #NUFC focus on the bottom line is illustrated by them reporting the 4th highest profit in England in the last 9 years of £120m, despite the chunky £47m loss in 2016/17. The only clubs with higher profits were #THFC £411m, #MUFC £212m and #AFC £166m.

Player sales have had a decent impact on #NUFC profits, contributing £174m in the last decade. The interesting thing is there has been no discernible increase recently: last 5 years £91m, preceding 5 years £83m. This year will include lucrative sale of Ayoze Perez to #LCFC.

#NUFC EBITDA (Earnings Before Interest, Depreciation and Amortisation), which strips out player sales and non-cash items to give underlying profitability, fell from a club record £61m to £56m, but still much higher than the minus £20m in the Championship.

As a consequence, #NUFC EBITDA of £56m is actually the 6th highest in the Premier League, though is less than a third of #MUFC £186m and #THFC £168m. They are only behind five of the Big Six clubs, but are ahead of #CFC £43m.

#NUFC operating profit is lower at £15m, as it includes player amortisation and depreciation. This was £3m lower than previous season, but was still 3rd best in the Premier League, only behind #THFC £96m and #MUFC £24m. Only 7 clubs were profitable – with just 4 above £2m.

#NUFC £176m revenue has grown £51m (40%) in three years, almost entirely due to the new TV deal that started in 2017. It’s a similar story since Mike Ashley’s arrival in 2007, as revenue has grown £89m (basically doubled), but £98m is from centrally negotiated TV contracts.

#NUFC £176m revenue is 10th highest in the Premier League, down from 8th in the previous season, having been overtaken by #WHUFC and #LCFC. There is a substantial gap to the Big Six with Newcastle being less than half of 6th placed #AFC £395m.

For some reason, #NUFC did not submit revenue details to Deloitte for their annual Money League, which ranks clubs globally. However, their £176m would have unofficially placed them 23rd, just ahead of Champions League semi-finalists Ajax, but down from 19th in 2017/18.

Before Ashley’s 2007 takeover, #NUFC had the 14th highest revenue in the world, just £19m lower than the 10th placed club in the Money League. In 2019 this gap has soared to £229m, as the club has stagnated and been left behind by others’ growth.

#NUFC £124m broadcasting revenue was the 12th highest in the top flight. Here, European qualification makes a big difference, as can be seen by the Champions League earnings in particular: #LFC £98m, #THFC £90m, #MUFC £82m and #MCFC £82m.

#NUFC Premier League TV money fell £3m to £120m, as £6m reduction in merit payment (finished 3 places lower in the league) was partly offset by increases in overseas TV rights £2m and facility fee (1 more live game) £1m . Shown live 19 times, due to the club’s popularity.

#NUFC have only qualified once for Europe under Ashley, earning just €5m in 12 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 €217m in last 4 years

#NUFC primary objective is “being a member of the Premier League”, which is to an extent understandable, given that 70% of their revenue comes from TV (£124m of £176m). That said, the only club outside the Big Six with a lower reliance on TV is #WHUFC and 6 clubs are above 80%.

#NUFC match day revenue rose by £0.9m (4%) to £24.8m, despite attendance falling from 51,992 to 51,116, largely due to ticket price rises of up to 20%. This is the 8th highest in the top tier, only behind the Big Six and #WHUFC.

However, #NUFC £25m match day revenue is £9m (26%) less than the £34m in the last season before Ashley’s arrival. Other clubs have surged ahead in this period either via stadium developments or success on the pitch, most notably #LFC and #THFC, both up £46m.

As testament to #NUFC fans’ loyalty, average attendance has been above 51,000 for the last 3 years, including a very impressive 51,108 in the Championship. Ticket prices rose 5% in 2019/20, though not for 20,000 long-term season ticket holders (no price increases for 10 years).

#NUFC attendance of 51,116 was the 7th highest in the Premier League, but it is worth noting that the club reportedly had to give away around 10,000 half season tickets to present a full stadium to broadcasters (and potential purchasers).

#NUFC commercial income fell £0.5m (2%) to £27.7m, as they hosted 3 Ed Sheeran gigs in the prior year. This is mid-table in the Premier League, only around 10% of #MUFC £275m. That might be an unreasonable comparison, but they are also behind #EFC £41m, #WHUFC £36m and #LCFC £36m

Ashley has not managed to grow #NUFC commercial income at all in 12 years, so the club has fallen way behind rivals in this important revenue stream, e.g. the Big Six have grown by £70-220m in this period. Newcastle outsourced catering in 2009, but that was only worth £6m.

Ashley did pay #NUFC £1.1m for stadium advertising, up from £385k the previous season. Interestingly, this was around the same as the £1.1m the club spent on purchasing merchandise from the owner’s companies. Previous year’s accounts said advertising would be £2m in 2019/20.

#NUFC main commercial deals are up for renewal at the end of this season: shirt sponsor Fun88 £6.5m after 3 years; Puma £6.5m after being the club’s kit supplier since 2010 (possible 1 year extension). New sleeve sponsor from this season is cryptocurrency trader StormGain.

#NUFC reported wage bill rose £3m (3%) from £94m to £97m, but this is a bit misleading, due to movements in the onerous contracts provision (£10m release in 2018, £4m in 2019). Excluding these once-offs, the underlying wage bill actually fell £2m from £103m to £101m.

#NUFC enjoyed the 5th highest wage bill in England before Ashley bought club in 2007, but since then this has risen by just £37m (62%) from £60m to £97m, while others have increased wages by significantly more, e.g. #THFC up £135m (308%) from £44m to £179m.

As a result, #NUFC £97m was only the 14th highest wage bill in England. Even if we adjust for the accrual release, their £101m would still be just behind #BHAFC. Maybe most surprisingly, this would be a full £18m below #CPFC £119m.

#NUFC reported wages to turnover ratio increased from 52% to 55%, but after excluding once-off factors, it fell from 58% to 57%. Either way, this is one of the lowest (best) in the Premier League, remaining under Newcastle’s own 60% target.

Remuneration for #NUFC highest paid director (presumably managing director Lee Charnley) was cut 11% from £300k to £267k, which is one of the lowest in the Premier League. This is nowhere near the huge sums trousered by Daniel Levy #THFC (£7m) and Ed Woodward #MUFC £3.2m.

#NUFC player amortisation, the annual charge to write-down transfer fees over the life of a player’s contract, fell £2.7m (7%) from a club record £41.3m to £38.6m, reflecting lower player purchases since the substantial £115m outlay in 2015/16.

As a result, #NUFC player amortisation of £39m is firmly in the bottom half of the Premier League table, just behind #FFC £43m and #THFC £48m. However, for more context, it is less than a quarter of big-spending #CFC £168m.

#NUFC spent £43m on player purchases, including Almiron, Muto, Merino, Fernandez, Schär and Dubravka. This means they have spent £289m in the past 5 seasons. That is all well and good, but Newcastle still had the 6th lowest spend in the PL last season, even behind #HTAFC.

#NUFC have ramped up their spending in the transfer market, so much so that £280m in the last 5 years is almost 3 times the £97m in the preceding 5 years. The problem is that their average annual net spend of just £13m over the last decade is much less than the leading clubs.

That said, #NUFC 2019/20 accounts will include the expensive acquisitions of Joelinton (the club’s £40m record buy) and Allan Saint-Maximin. The accounts state that there is £48m net spend since the 2019 year-end.

#NUFC debt was cut from £145m to £112m, as the club repaid £33m of Mike Ashley’s loan to leave the owner’s outstanding debt at £111m. Net debt only fell by £13m from £111m to £98m, as cash also dropped £20m. No external debt beyond £1m finance leases.

Despite the repayment, #NUFC £112m is 8th highest in the Premier League and £35m higher than the £77m Ashley took on in 2007, including £58m mortgage for stadium development. Unlike the owners at many other clubs, Ashley has not converted any debt into equity.

#NUFC only paid £43k interest in 2018/19, as Ashley’s loans are interest-free. In fairness to Big Mike, the switch from external bank debt to owner financing has saved the club a lot of money in annual interest payments, which were as high as £8m in 2008.

#NUFC used to pay all transfer fees upfront, but now owe £12m, though down from prior year’s £28m, and second smallest in the Premier League. On the other hand, they are owed £48m by other clubs, which must impact the transfer budget, as the cash is not immediately available.

#NUFC generated £35m cash from operating activities, spending a net £19m on players and £2m tax, before repaying £33m of the owner’s loan. Only £305k spent on stadium, which means a paltry £12m on infrastructure improvements during Ashley’s 12-year tenure.

As a result, #NUFC cash balance decreased from £34m to £14m. This is one of the lowest in the Premier League, which is not an ideal position to be in given the COVID-19 outbreak, where it is important to have as much liquidity as possible.

During the Ashley era, #NUFC generated £164m from operations, boosted by his £111m loan. Most of this (£164m) was spent on the squad, while £83m was used to repay the bank loan and make interest payments, though those were very much in his early years.

#NUFC have been criticised for being one of the few Premier League clubs to use the government’s furlough scheme to fund 80% of the wages for non-playing staff, though the club makes up the difference. Players continue to be paid in full.

#NUFC are close to a takeover by a consortium led by Saudi Arabia’s investment fund (plus the Reuben brothers and Amanda Staveley). However, the deal still awaits Premier League approval, which has been delayed due to alleged links between the Saudi government and TV piracy.

The good news for the prospective purchasers is that #NUFC prudent approach under Ashley and the resulting profits would leave them with plenty of room to manoeuvre and still meet FFP. The maximum loss over 3 years is £105m, while Newcastle have made £64m profit in last 2 years.

Ashley has put #NUFC on a sound financial footing, though he can be criticised for under-investment and poor commercial performance. Fans only need look at Sunderland to see that big spending does not always deliver success, but a club of Newcastle’s resources should aim higher.

The ultimate goal of a football club is not to make profits, but to challenge for trophies. If that is a bridge too far for #NUFC, they should be capable of comfortably finishing in the top half of the table, and at the very least not having to fight against relegation.