Mike Ashley – GAME OF THE PEOPLE

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 11^th 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.

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.