Newcastle United’s calm before the storm

AFTER AROUND a dozen games of the 2021-22 season, Newcastle were being written off as relegation certainties. In their first 11 fixtures, they drew five and lost six. They were scrambling around at the bottom of the Premier League, the fans hated the club’s owner and they were urging on the controversial sale to a group of investors led by the Saudi Arabian sovereign wealth fund.

It was widely believed Newcastle, while a big club in the eyes of their fans and many others, had fallen too far behind the competition. The Geordies get tired of hearing about their lack of success and the fact their glory days are now a very deep sepia, and they’ve had plenty of false dawns since 1969 when they last won silverware.

Their 2020-21 finances revealed their total turnover was £ 140 million, a fraction of the Premier’s top clubs and 8% down on the 2019-20 season. Newcastle under owner Mike Ashley were run prudently and invariably made a profit – over the past 10 years, only four clubs (Tottenham, Manchester United, Liverpool and Burnley) have made a higher consolidated profit than Newcastle’s £ 48 million.

Despite this achievement, a lack of continued investment and, it would seem, a big shortage of ambition, created a stagnant club with disillusioned supporters.

Inevitably, Newcastle are being linked with dozens of players as the 2022 season ends.

In 2020-21, Newcastle made a loss for the second consecutive season, although their pre-tax deficit of £ 13.6 million was modest compared to some of their Premier bedfellows. For a club that can pull in crowds of 50,000-plus, Newcastle’s income is definitely on the side of underachievement and is only a quarter of Manchester City’s and less than half of Tottenham Hotspur’s £ 360 million. The potential is very significant, but will surely require a complete overhaul of the club’s commercial strategy as  the new era gathers momentum.

Newcastle’s commercial revenues fell by 29% in 2020-21 to £ 21 million, underlining one of the key areas where the club is punching well below its weight. Matchday income was almost wiped out, but broadcasting rose by 12% to £ 119 million. When Ashley took over the club, their income was among the top half dozen in the league, but since then they are well below halfway. Clearly Newcastle’s decline has been on and off the pitch.

Newcastle’s wage bill for the season was £ 106.8 million, representing 76% of income. The ratio actually fell in 2020-21, but two seasons ago, it was 55%, despite a rise of only £ 10 million in actual wages. In that time, the club’s turnover has gone from £ 176 million to £ 140 million. Covid-19 has cost the club some £ 40 million, a figure that is actually less damaging than some Premier clubs, notably Everton, who believe the pandemic has had a negative effect of some £ 170 million.

The club shaved £ 25 million off operating expenses, which limited the overall loss for the season, but was also helped by taking advantage of the UK government’s furlough scheme during the pandemic. Ashley used the programme in both covid-affected seasons. However, when the new owners took over, they were shocked at the low level of wages among non-playing staff, and have since raised salaries.

Since buying the club, the new owners have pumped in £ 167.9 million and Mike Ashley has been paid back his £ 107 million loan to Newcastle United. As at the end of 2020-21, their net debt was £ 94.5 million, which was £ 50 million higher than 2019-20.

The January 2022 transfer window saw the club spend heavily to avoid relegation. In November 2021, Steve Bruce was sacked and Eddie Howe installed as manager. The January transfer window saw the club spend heavily to avoid relegation with short-to-medium term signings such as Chris Wood (Burnley £ 25 million), Kieran Trippier (Atlético Madrid £ 12 million), Dan Burn (Brighton £ 13 million) and Bruno Guimarães (Lyon £ 33 million). Howe’s record was enough to keep Newcastle in the Premier, 13 wins and five draws from 27 games taking them to 11th place.

There is expectation the club will spend big in the summer of 2022, although they will have to be wary of Financial Fair Play issues. Inevitably, they are being linked with dozens of players, including the sought-after 22 year-old Uruguayan Darwin Núñez of Benfica and Lyon’s Brazilian striker Lucas Paquetá.

In theory, Newcastle United became the richest club in the world after being bought by Saudi Arabia’s Public Investment Fund, so some fans will expect an instant transformation. At the same time, the debate about human rights and the regime in Saudi Arabia will refuse to go away, so they will have to endure ongoing criticism and plenty of questioning.

The owners have a target of title contention within five years, a sensible aspiration because the football world has changed since Chelsea and Manchester City were bought by Roman Abramovich and Abu Dhabi respectively. It is that much harder to play “fantasy football” and sign everything that moves in today’s environment. Nevertheless, that won’t stop St. James’ Park being the centre of attention in the summer of 2022.