Since PIF took up a majority stake in Newcastle in October 2021 as the lead party in a consortium that wrested the club from the hands of Mike Ashley, the sovereign wealth fund’s financial commitment now stands at £528.7million ($703.4m) — £244.0m to buy the club (of the £305m total purchase price), and a further £284.7m injected into Newcastle since. In total, the club has received £335.4m in owner cash since the takeover.
In a financial sense, Newcastle’s post-Ashley world has been
defined by what was a rare thing under their former owner: heavy losses. The
first season under new guidance produced a pre-tax deficit of £72.9m, followed
a year later with a £71.8m loss in 2022-23.
Last season’s £11.1m
in the red looks significantly improved against that backdrop, though were it
not for a late-June flurry of transfer activity, the club would have posted
three consecutive deficits in the region of £70m. Under Ashley, the club’s highest
loss was £46.7m, incurred in the 2016-17 promotion season when Rafa Benitez was
backed with significant sums (at least in the context of the Championship) to
return Newcastle to the top tier.
Newcastle’s combined pre-tax loss over the 2022-24 profit
and sustainability (PSR) cycle totalled £155.8m, leaving them with just over
£50m in deductible costs to find to come in under the £105m PSR loss limit. It
looked a tight squeeze. Newcastle’s depreciation and non-player amortisation
costs over the cycle totalled £10.9m, while expenditure on the women’s team —
albeit rising under new owners — was just £3.6m in the same three-year period.
Costs on the club’s academy and community development are
unknown but ultimately came to at least the £36.3m the club needed to hit the
£105m limit — though The Athletic estimates Newcastle’s PSR headroom
last season was very much marginal.
In one sense, Newcastle were fortunate last season — UEFA’s
football earnings rule, which limits club losses, wasn’t applied, as European
football’s governing body gave clubs time to transition to new regulations.
This season, club losses were limited to €80m over the previous two years but,
without European football this year, Newcastle didn’t need to worry.
Wage bill and rising
costs
Between Ashley’s final season and 2023-24, the club’s wage
bill leapt £111.9m, while the cost of amortising player transfer fees was up a
further £64.4m. Figures for the 2020-21 season were only over an 11-month
accounting period, but even adjusting for that leaves a hefty increase over the
past three years.
In terms of that wage bill, at £218.7m, it set a club record
for the third year running, up 18 per cent on 2022-23. Yet while wages are
growing, Newcastle have over-performed relative to their staff costs in both
full seasons under Eddie Howe, first by a big margin — finishing fourth two
seasons ago with the Premier League’s ninth-highest wage bill — and then closer
to expectation — finishing seventh last season with the eighth-highest. Wage
growth is unsurprising but Newcastle haven’t led the way either; Arsenal,
Bournemouth and Aston Villa each displayed higher year-on-year growth last
season.
Even with club record revenues of £320.3m last season,
increased income has been outstripped by rising costs. That has left operating
losses hovering around the £68m mark in each of the past two seasons and while
six Premier League clubs posted a worse day-to-day result than Newcastle last season,
a key reason they ran so close to the PSR brink was their pretty awful record
of selling players for profit.
Where other clubs have routinely turned to player sales as a
way to boost bottom lines, Newcastle have long been poor sellers. Between
2020-21 and 2022-23, they made just £10.4m profit on outgoing players.
Thirty-three English clubs made a greater profit during those three seasons.
This season, Newcastle sold Miguel Almiron for £11m, a deal
they will recognise a profit of about £9m on. A new Adidas deal (more on that
in the next section) and a rise in gate receipts will boost revenue, but banking
extra merit payments for finishing high up the table has become more
important, as Newcastle could do with offsetting the £30m in lost UEFA income
this term.
Commercial revenue
Commercial revenues have more than tripled to £83.6m. From
lower mid-table, Newcastle’s income here is now the largest outside the traditional
‘Big Six’. Their 375 per cent commercial income growth in the past three
seasons is the highest of any club to have spent both of the two compared years
in the top tier. No one else comes close — the next-highest growth from a club
who was in the Premier League in both 2020-21 and last season is Fulham’s 155
per cent.
While little attempt has been made to hide newfound links to
PIF and Saudi-backed companies, they form part of a wider commercial strategy
undertaken since late 2021. Critiques of the non-existent attempts to grow
commercial income under Ashley were well-founded; by the time he sold up,
Newcastle’s commercial revenues were actually less than in his
opening year in charge.
Newcastle have a long way to go to catch up to the ‘Big Six’
in England — Arsenal were bottom of that pack last season yet still booked
commercial income of £218.3m — but they’ve rapidly moved into position as the
highest-earning of the rest.
Away from the playing squad, there’s been a noticeable
uptick in capital expenditure. Spending on infrastructure under Ashley was
damningly low, not even getting above the £1m mark in his final six years
at the helm.
Since his departure, over £40m has been invested in fixed
assets, principally in the form of improvements at St James’ Park and the
club’s training ground, alongside repurchasing land behind the Gallowgate End
(sold by Ashley) and, since then, investing in the Stack leisure hub and
fanzone that now sits there.
When a decision will be arrived at is anyone’s guess, but
improving matchday revenues seems necessary if Newcastle are to compete with
the elite. Four English clubs currently boast over £100m in annual gate
receipts; Newcastle, even with recent substantial growth, are only at half
that.
Decisions to be made
Newcastle’s immediate future is reliant on PIF’s attitude
and funding. A key reason the stadium plans remain mired in stasis is that all
the big decisions, and particularly the expensive ones, must go through the
Saudi branch of Newcastle’s ownership group. Without its say-so, nothing big
gets done.
How much wider factors will influence PIF plans on Tyneside
is unknown. Seeking to stem the tide of falling oil prices, PIF has reportedly
scaled back or cut various projects. Giga-projects, including the futuristic
city of Neom, have been reduced already; it’s unclear if such cuts would reach
St James’ Park.
Of immediate focus is a return to the Champions League.
Achieving that would bring not just sporting glee but could also solve many of
their financial problems, with the tournament’s new format providing clubs
with even more wealth. Newcastle’s earning potential would be hampered by UEFA
rewarding clubs for historical performance, as it was in 2022-23, but there
would still be plenty of cash to go around. The chance to further increase
commercial income wouldn’t be sniffed at either.
Newcastle United are unrecognisable from October 2021. Being
backed by one of the richest sovereign wealth funds on the planet has made a
mark, believe it or not. Football’s financial regulations may have slowed that
impact, but the club have still spent heavily.
The pump has been primed. Success has started to flow. How
quickly more follows is anyone’s guess, but finishing in the top five next
month should allow Newcastle’s owners to loosen the taps once more.
Eddie Howe has made a huge contribution to Newcastle's success and I wish him a speedy recovery from his shock illness.
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