Newcastle loss underlines change of status

ONE OF the big criticisms of former Newcastle United owner Mike Ashley was his apparent unwillingness to continue investing in the club. Between 2013 and 2021, Newcastle made a loss just three times, the combined pre-tax losses amounting to £ 86 million. Newcastle’s revenues became lack lustre, notably around commercial activity, and the club was unable to compete at the top of the Premier table. 

Now under the ownership of the Saudi Arabian Public Investment Fund, Newcastle have just announced a £ 72.9 million pre-tax loss for 2021-22, a deficit increase of £ 59 million on 2020-21.

This may seem a big figure, but with the sort of backing the club now has, nobody is going to worry too much about a loss of this size. If it becomes a regular feature of the club’s accounts, profitability and sustainability rules will have to be carefully monitored, but for the time being, the loss shows that Newcastle have become a club with very wealthy owner. The last time they posted a profit was in 2019.

They say you have to speculate to accumulate and Newcastle’s spending, while not in the same category as Chelsea’s when Roman Abramovich took the club over in 2003, suggests the club is trying to build a platform to move forward in a much bolder way. Like Chelsea did with Mourinho, Newcastle have hired a top manager who has time on his side and the arrival of Eddie Howe could well be the best signing they have made. The players bought so far demonstrates they are not going overboard in constructing the all-stars, but they are gradually putting together a squad that can make a challenge for the top four. They may well do it this season.

The club’s wage bill reflects the £ 90 million influx of new players in mid-season – £ 170.2 million versus £ 106 million in 2020-21. The wage-to-income ratio for 2021-22 was 94.6%, resulting in a dramatic rise over five years from 53% to 95%.

Newcastle’s matchday income totalled £ 27.5 million from an average gate of 51,443 – the seventh highest in the Premier League – and attendances have risen in 2022-23 to over 52,000. This income stream recovered in 2021-22 after the pandemic-restricted 2020-21 season. Commercial revenues were also up by more than £ 7 million to £ 28.3 million, but there is significant upside to be leveraged. Broadcasting earnings were also up by just under £ 5 million to £ 124.1 million. The return of European football would boost this avenue of Newcastle’s income substantially, especially if it happens to be in the UEFA Champions League. Their last European campaign was in the Europa League in 2012-13.

Player trading has rarely been very profitable for Newcastle and in 2020-21 this dropped to £ 1.7 million. In 2021-22, the profit from player sales was £ 5.8 million, an improvement but still way behind many clubs. How this develops depends on how Newcastle decide to continue enhancing their squad and whether player trading becomes a priority. The biggest profit they’ve made since 2013 was £ 42 million in 2017.

Newcastle should achieve their best placing in a decade this season, they have not finished above 10th place in the past 10 years. They did reach the EFL Cup final earlier this year, which was a distinct sign of progress, but the club’s owners will be expecting occasions like a Wembley visit to be a regular part of life at St. James’ Park in the future. The next stage is to win a major prize, something that hasn’t been achieved since 1969.

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