Member Article

Newcastle United feel relegation bite as turnover and profits drop

The financial impact of Newcastle United’s 15/16 season of relegation woe has been made clear today, as the club released its annual accounts.

Whilst the club remains in profit, its turnover dropped from £129.7m in 2015 to £125.8m for 2016.

Profit after tax for the year of £4.6m was down from the £32.5m recorded in 2015 with the club feeling the brunt of a £4.5m drop in media income as well as spending an outlay on players as it bid to avoid relegation.

The club made signifcant signings to improve its playing squad, signing high-profile English players such as Jonjo Shelvey and Andros Townsend although the new recruits couldn’t stop the team from succumbing to a lowly 18th place finish.

The total net cash spend on players in the financial year to June 2016 was £70.7m, notably higher than the £23.8m spent in 2015.

The rise in wages to turnover ratio, up to 59.4% from 50.1% in 2015, again demonstrates the effects of squad investment.

In terms of money owed to Owner Mike Ashley, and companies under his control, figures remained unchanged at £129.0m which continue to be interest-free.

Club statement

Managing director, Lee Charnley, provided a full statement to explain the accounts and the reasons behind the decreases.

He revealed: “The 2015/16 season was extremely disappointing for everyone connected with the club.

“Significant sums of money were spent to strengthen the playing squad in the summer 2015 and January 2016 windows, which also resulted in an increase in our annual wage bill. In the context of this spend, relegation was both unacceptable and totally unexpected.

“The financial impact of relegation is difficult to overstate and this will become evident in our next set of financial results for the year ending June 2017.

“The biggest impact by far is the dramatic reduction in centrally distributed income that comes with dropping down a division; the reality being our income in this area is forecast to fall by over £30m compared to 2015-16.

“To highlight the differences, our 16 live TV games last season earned us £12m in revenue. Contrast this with 2016/17 EFL live fees which, based on our current number of confirmed appearances (12 away and 6 home), will earn us a total of £720k.

“To illustrate further the cost of relegation, 2016/17 marks year one of the new Premier League TV deal and the team that finishes in 18th place this season is expected to receive in the region of £30m more revenue than we did for the same place finish last year.

“Our approach, following relegation, was to make further sizeable investment in our playing squad in preparation for the EFL Championship season ahead and our annual wage bill is, we believe, still above and beyond many current Premier League teams.

“Whilst not without financial risks, this strategy was adopted in order to maximise our chances of promotion at the first time of asking.

“Outgoing transfers will ultimately generate a significant net player trading surplus for the summer 2016 transfer window but, due to the cash profile of the deals, this will result in a net cash outlay in 2016-17.

“Our adopted strategy has therefore only been made possible by the cash injection from our owner, who continues to provide interest free funding to support the club’s operations, never more important than during this financially challenging season.”