Profitability rules constrain Newcastle

Newcastle’s pre-tax loss in 2022/23 was much the same as the previous year at £73m, as the “continued investment” in the squad was offset by strong revenue growth.

Revenue shot up £70m (39%) from £180m to a new club record £250m, but this was nearly matched by £62m (24%) growth in operating expenses to £320m. In addition, profit from player sales halved from £6m to £3m, while net interest payable rose £6m from £1m to £7m.

All three revenue streams saw significant growth, so much so that new club records were established in each of them. Commercial was up by nearly two-thirds (£19m) from £28m to £47m, while match day rose £10m (38%) from £28m to £38m.  The smallest percentage growth was in broadcasting, but even that was 33% higher, increasing £41m from £124m to £165m.

Newcastle’s revenue growth has been very impressive, higher in percentage terms than the Big Six clubs. In absolute terms, their £74m increase since 2019 has only been outpaced by Manchester City, though many clubs still have to publish their accounts for 2022/23.

Despite the impressive revenue growth, the fact remains that Newcastle still lost £73m, which is the worst financial result in the Premier League in 2022/23 so far. In fairness, only four clubs have so far published accounts for last season, but only two clubs reported higher losses in 2021/22.

Player trading

One area where Newcastle have plenty of room for improvement is player trading, considering that they have only made around £11m profit from player sales in the last three years.  It will be a bit better this season following the sales of Allan Saint-Maximin to Al-Ahli for £23m and Chris Wood to Nottingham Forest for £15m, but it’s still a lot less than their rivals.  The need to sell players has been acknowledged by Newcastle’s hierarchy, especially to help meet the club’s Financial Fair Play (FFP) challenges.

Champions League participation will further raise the club’s revenue in 2023/24, as it is estimated that this has earned them around €34m in TV money.  This is better than English clubs received in the Europa League and the Europe Conference, which averaged €21m and €14m respectively, but it is much lower than the other English representatives in the Champions League: Manchester City €96m, Arsenal €80m and Manchester United €60m.

Newcastle have commenced a feasibility study on increasing St James’ Park’s capacity to 65,000, which would make it the second largest stadium in the Premier League behind Old Trafford, though this project is complicated by the city centre location.

Newcastle’s £187m wage bill is now the 7th highest in England, only surpassed by the Big Six, with clear water between them and the rest of the league.  However, for some more perspective, Newcastle’s wages are still a lot less than the highest-spending clubs, e.g. they are only around half of Manchester City £423m and Liverpool £366m. That said, they have significantly narrowed the gap to Arsenal £212m and Tottenham £209m (though their figures are from 2021/22).

Newcastle’s average gross spend since PIF’s arrival is around three times as much as the preceding 8-year period, rising from £51m to £151m.

The new owners have already spent more than Ashley on infrastructure, i.e. the stadium and training ground. PIF’s £27m outlay in the last two years is nearly four times as much as the feeble £7m in the preceding 12 years.

Newcastle’s new owners have injected £266m of capital to date, including £127m last season and £60m in August 2023. As they paid £305m to purchase the club, that means that PIF have now spent £571m in total.

Financial fair play

PIF inherited a pretty solid FFP position from Ashley, as the former owner’s tightfisted approach to spending meant that they had a fair amount of wriggle room.   However, the FFP monitoring period is a moving target, so the 2022/23 calculation dropped the £41m 2018/19 profit, replacing it with last season’s £73m loss, i.e. a negative swing of £114m.  After making deductions for “healthy” expenditure (infrastructure, academy, community and women’s football) and COVID losses, Newcastle were still just about within target, but it must have been mighty close.   The fact is that despite being backed by the endless wealth of Saudi Arabia’s Public Investment Fund, Newcastle now have very little room to manouevre.

The club will have to box clever clever to stay within FFP rules. This means that if there are to be any arrivals, that almost certainly means also having to sell players.