WHEN Newcastle United were taken over by Saudi Arabia’s Public Investment Fund (PIF), the expectation, naturally, was that the club would spend its way to success. Indeed, in the January 2022 window, Newcastle’s first under PIF ownership, £ 90 million was spent on a handful of players to strengthen a struggling team. In 2022-23, a further £ 167 million was paid out for fresh talent and in the current campaign, another £ 134 million was spent. These represent sizeable investments, but there has been no Chelsea-style scattergun spree.
Importantly, Newcastle have demonstrated they can grow their revenue base. In 2021-22, income was up by 29% to £ 180 million, but in 2022-23, it was rose by another 39% to £ 250 million. This is an impressive growth rate, but Newcastle know that they are still some way off being comparable to the Premier League’s big six. All the major revenue streams showed a healthy increase in 2022-23; matchday was up by 37% to £ 38 million, commercial jumped by 65% to £ 46.8 million and media rose by 33% to £ 165 million. Overall, Newcastle’s income has gone up by £ 100 million since 2020.
For the past three seasons, Newcastle have lost a combined amount of £ 160 million, which on the face of it, looks precarious in terms of meeting the profit and sustainability rules. However, taking into consideration the allowances the club can apply to their expenditure, such as infrastructure spend, experts believe Newcastle should come in at just under the permitted £ 105 million of losses over a three-year period.
In 2022-23, Newcastle’s pre-tax loss was £ 73.3 million, slightly more than 2021-22. Wages went up by more than 9% to £ 186.7 million, but given the rise in revenues, the wage-to-income ratio went down from 94.6% to 74.1%. The continued investment in the squad contributed to the overall loss, with the biggest fees paid for Alexander Isak (£ 63 million from Real Sociedad), Anthony Gordon (£ 45 million from Everton) and Sven Botman (£ 35 million from Lille). On the other side of the balance sheet, Newcastle have had limited success in player trading, with a meagre £ 2.8 million profit from the sale of players’ registrations. This is another area where the club trail the likes of Chelsea and Manchester City.
Newcastle’s CEO, Darren Eales, painted a very optimistic picture of the club’s trajectory, revealing that it appeared to be getting easier to attract good sponsorship and commercial partners. The increase in commercial revenues, up from £ 20 million in 2021 to £ 47 million in 2023, is a very positive sign of the club’s growing visibility. Eales pointed to the relationship with Adidas and the shirt sponsor, SELA as examples of how much more attractive Newcastle have become.
The club has taken steps to support its working capital and has taken out a term loan of £ 50 million and a revolving loan facility of £ 25 million (at standard market rates) with HSBC and Deutsche Bank.
In 2023-24, Newcastle took part in the Champions League and their financials for the current season will include around £ 30 million from UEFA. The club enjoys near-100% stadium utilisation with an average of more than 52,000 but they are looking to expand the capacity of St. James’ Park and are working on development plans at present. Newcastle’s ticket prices compare favourably with most of the Premier League and are around the 14th most expensive among the top flight’s clubs. To grow matchday revenues, the club either has to increase capacity the ground or increase prices.
Regular European [Champions League] football would benefit broadcasting income and commercial activity. In 2023-24, Newcastle have hit a bad patch which may hamper their chances of returning to the Champions League in 2024-25. If they do get over their dip in form sooner rather than later, Newcastle certainly have the squad to rise the table, but if the current malaise continues, there could be changes at St. James’ Park, and we all know what that could mean.
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