Newcastle United’s 2019-20 finances – worth the wait?

ON THE face of it, Newcastle’s financials for 2019-20 could have been far worse, but they did highlight the lack of commercial progress made by the club over the past decade or so. With a decent level of cash in the bank, reduced net debt and a pre-tax loss of £ 26 million, there’s little high drama in the figures, but over the long-term, the club’s inability to push on and compete must be frustrating for all followers of “the Toon”.

Mike Ashley, the owner, is still keen to sell the club, but the lack of a credible buyer means the unpopular billionaire is still in control. Although £ 26 million could have been higher – compared to the huge losses of Manchester City, Everton and Aston Villa – it has to be remembered that in 2018-19, Newcastle United made a profit of £ 41 million, so there’s been a £ 67 million negative swing. Over the past 10 years, the club’s aggregate pre-tax profit was £ 94 million, a figure bettered by only three clubs. They have made a profit in eight of the past 10 years, hence the club’s comment: “The [2019-20] results do not represent a normal year for the company.”

The club’s revenues were down by 13% from £ 176 million to £ 152.6 million, no surprise given the cost of the pandemic. Newcastle estimated covid-19 cost them over £ 14 million.

Matchday income was down 30% to £ 17.4 million, while broadcasting, which accounts for 70% of overall earnings, was 14% lower at £ 106.1 million. Commercial income, which has failed to keep pace with the club’s rivals, was 1% down to £ 25.9 million. An example of their lack-lustre performance in building a formidable commercial presence is the club’s shirt sponsorship in 2019-20, which was only 10% of Manchester United’s deal and one sixth of Manchester City’s. There could be more energy around commercial business in the form of the club’s new partnership with Castore, who will operate the club’s retail operations.

Against this background, Newcastle’s wage bill totalled £ 121.1 million, representing an increase of 25% on 2018-19. This put the wage-to-income ratio up by 25 percentage points to 79.4%, which was considerably higher than the average for the Premier League (69.3%). 

Newcastle’s wages have doubled over a 13-year period, but this pales into insignificance compared to Liverpool (+320%), Tottenham (+314%) and Manchester City (+866%). Furthermore, Newcastle’s net spend in the transfer market was among the lowest in the Premier (£150 million). Their squad for 2019-20 cost around £ 216 million, again at the bottom end of the division.

More positively, Newcastle’s net debt for 2019-20 totalled £ 45 million, which was a big drop on 2018-19’s £ 98 million and 2018’s £ 111 million. In addition, the club’s total cash was up to £ 62.7 million, a substantial increase on 2018-19 (£ 14 million). 

Mike Ashley is still hoping to sell the club to the Saudi Arabian sovereign wealth fund, a deal that caused a lot of controversy when announced. He is waiting for an arbitration hearing with the Premier League, but this won’t take place until early-2022. Given the potential of the club and its strong regional identity, there should be no shortage of takers for Newcastle United.

Despite the obvious lack of verve in Newcastle’s financials, they are still among the top 30 clubs in Europe, indeed, they are just outside the top 20 by revenues. But they are over-reliant on broadcasting income and their commercial revenues are really disappointing for a club that can call on 50,000-plus supporters in normal times. While Newcastle is not in a precarious position, it has been left behind by the top Premier clubs and in their current state, it is difficult to see the long wait for genuine success – it is now over a half a century since their last trophy. New ownership may provide the fresh impetus that is sorely required, but in the meantime, better communication and accessibility could change the dynamic between the owner and the Newcastle public.

Crystal Palace and the wage bill worry

CRYSTAL PALACE go into the 2021-22 season under new management, but as well as hoping Patrick Vieira provides some fresh impetus, they will be eager for a better financial year.

Vieira has a big challenge on his hands – a squad rebuild is in progress and the club’s wage bill is too high. According to CIES Football Observatory, Palace have the highest average age, not just among Premier League squads (29.6), but virtually the whole of Europe. As Vieira took up his new role, 20 players’ contracts were about to expire, underlining the size of the task facing the former Arsenal and France midfielder.

The club has only recently unveiled its 2019-20 financial statements (which were for a 13-month-period) with Palace making a hefty £ 58 million loss, a negative turnaround of some £63 million on the previous season. The 2019 result was somewhat distorted by the sale of Aaron Wan-Bissaka to Manchester United for £ 45 million, but there was no such boost to the finances in 2019-20, the profit from player sales, which hit £ 46.2 million in 2019, fell to just £ 539,000.

Palace’s next big transaction may come if and when Wilfried Zaha leaves the club – current value according to Transfermarkt £ 40 million – or players like Eberechi Eze and Tyrick Mitchell continue their progress and the club decides to cash-in. Zaha remains their prized asset but in the current environment, Palace will probably fail to command the sort of fee they would normally expect. At 28, his market value has arguably been higher.

Palace’s revenues for 2019-20 were down 8.5%, which is about on par with many top flight clubs, but £ 142.3 million was still the third highest total in their history as well as being the first sub-£150 million performance since 2017.

Palace’s matchday and broadcasting revenues were both down, by  8.7% and 9.3% respectively, but commercial income rose by 2.5% to £ 20.9 million. Palace’s matchday income of £ 8.6 million is low for a club of their size and was one of the lowest in the Premier League in 2019-20. Little wonder the club hope to make some improvements to Selhurst Park.

The club’s wage bill rose by 11% to £ 132.6 million, which means the wage-to-income ratio climbed to 93% from a still high 77%. This was obviously influenced by the age of the squad, hence Palace have invested in their academy as they look to recalibrate the strategy around recruitment and team-building. One of their targets is, according to media reports, 21 year-old Ozan Kabak of Schalke, who had a brief loan spell with Liverpool in 2020-21.

While the 2019-20 finances must be something of  a concern, the 2020-21 figures may be even more worrying given the full cost of the pandemic. Palace calculate the overall cost of covid-19 to be around £ 11 million and if the crisis had not unfolded, the club’s loss would be around £ 33 million, which would still have caused some furrowed brows at Selhurst Park. However, Palace have a decent level of liquidity with cash reserves of £ 58.4 million, which was boosted by a £ 30 million loan taken out towards the end of 2019-20. 

With the new season just a couple of weeks away, Palace’s financial position can be improved by finishing higher in the league in 2021-22. For a few places more, broadcasting income can be increased significantly.