Newcastle United have today published its annual accounts for the financial year ended 30th June 2011, and the results are good.
Derek LLambias – announces excellent financial results for Newcastle
The overall loss for the year (after amortization) was reported to be just £3.9M, less than the £4.5M estimate given some months ago, and that compares to a loss of £33.5M in 2009/2010 and £37.7M in 2008/2009.
Promotion to the Premier League resulted in a 69% increase in revenues, from £52.4M to £88.4M, and that was due to a three times increase in TV revenue.
Ticket sales revenue rose 16%, from £20.9M in 2009/2010 to £24.3M this financial year, based on an increase in corporate hospitality income associated with Newcastle’s return to the Premier League.
Just under a million fans attended St. James’ Park in 2010/2011, which was the the third highest attendance in England.
Another important factor over the last few years is that Newcastle have worked to bring its wages-to-revenue ratio down to a long-term sustainable level.
As an example 2008/2009 wages accounted for 82.7% of revenues, rising to 90.5% in the Championship season, and for the last financial year wages accounted for only 60.6% of revenue.
The net cash spend on player transfers to June 2011 was a plus of £5.4M, which includes the £35M fee from the sale of Andy Carroll to Liverpool FC in January of 2011, and Newcastle have since spent a further £25M in cash on players and their wages.
When Mike Ashley bought the club in the summer of 2007, he inherited outstanding deferred transfer payments totaling £36M for players both in the squad and those who had already left the club, and now the club is owed £5M from other clubs.
Newcastle have now cleared all of its third party debts, which stood at £76M in 2006/2007 and at that time the club incurred finance costs of £6.5M.
The debt owed to owner Mike Ashley remains at £140M, which continues to be provided interest-free by the Newcastle owner.
The Club secured a new two-year shirt sponsorship deal with Virgin Money in January of this year, and they earlier announced plans to sell the full naming rights to the stadium in order to help maximize revenue.
Newcastle United’s Managing Director Derek Llambias had this to say about the results:
“The Club’s financial results for the year end June 2011 are extremely strong. We can now count ourselves amongst very few clubs across the UK and Europe who are operating at close to break-even.”
“What is particularly pleasing is that we have achieved this whilst also ensuring we have a strong squad sitting firmly in the top third of the table and currently pushing for a European place.”
“Some of the key financial principles we set in place when Mike bought to the Club back in 2007 are now beginning to reap rewards. Most notably, our adherence to a strict transfer policy which avoids, or limits wherever possible, the acceptance of dated payments for players bought or sold.”
“We believe it is a far healthier financial model to settle full transfer fees for players up front, not dated over a period of years.” “We have dealt wisely in the transfer market and reinvested the income received from player sales into improving the squad. “
“Our net cash spend on player transfers to June 2011, which includes the sale of Andy Carroll, was a receipt of £5.4M, with a further £25M in cash spent on transfers and players’ wages since June 2011.”
“We have also worked hard to address an inherited wages-to-turnover ratio which was unsustainable. Wages now account for just over 60 per cent of turnover and we feel this is a healthy and affordable level.”
“A further significant achievement has been to clear all of the Club’s interest-bearing debt, which in 2006/2007 was costing £6.5M a year just to finance the debt. Mike Ashley continues to provide loans totalling £140M interest-free, for which we are extraordinarily fortunate. Once again, Mike has not taken any money out of the Club.”
When Newcastle now buy players in the transfer market they pay the full amount in cash up font, and that in itself is a very positive thing for Newcastle in the transfer market.
That’s because other clubs pay for the fee in yearly installments, as Newcastle did under Freddy Shepherd, simply because they don’t have the money to pay the full fee up front.
The selling club therefore gets the full transfer fee up front when they sell to Newcastle United – that’s a huge advantage for Newcastle.
These are excellent financial results for the club, and while Arsenal are undoubtedly the best run club financially in the country, Newcastle could well become the second best run club in England very soon, if we are not there already.
That’s got to be good news, and here are the updated revenues and profit (all losses) figures for Newcastle United over the last four financial years:
Finally if Newcastle do make profits in future years, Derek LLambias has said the profits will be reinvested into the club, and can be used for example to buy new players – so the intention is indeed to operate Newcastle as essentially a non- profit business.
That’s great and for those readers not savvy in these financial things, believe me when I say that Newcastle have done a great job over the last couple of years to put their financial house in order, there is just no way of getting away from that.
And that’s whether you love or hate Mike Ashley, the owner.
And if you believe the Daily Telegraph, they reported yesterday that it’s their understanding Newcastle will make a profit of close to £10M for this financial year, which ends on June 30th this year.
How much is that Lionel Messi worth again? 😀