Profits become losses as price of return to top tier revealed
COST OF TOON ‘GAMBLE’
NEWCASTLE United took a “financial gamble” in order to secure promotion back to the Premier League at the first time of asking in 2016/17, admits managing-director Lee Charnley.
The club finally filed their annual accounts for the year up to June 30, 2017, on Thursday – more than six weeks late – and they should be available in full early next week.
However, the headline figures have already been released by the club and they show during the last financial year – up to June 30, 2017 – Newcastle made a staggering operating loss of £90.9m, down from a profit of £0.9m for the 12 months previously, while winning the Championship title.
That loss was primarily driven by the dramatic reduction in TV revenue, which is believed to have dropped by a third, and also the fact the Magpies maintained the highest wage bill in the history of the EFL at £112.2m – a £37.5m increase on the previous campaign.
To put that into context, United’s wage bill would have put them midtable in terms of Premier League wage budgets last season.
As a result, turnover declined by roughly a third from £125.8m to 85.7m, while the loss Newcastle made after tax was £41.3m, down from a £4.6m profit.
Had the Magpies failed to secure promotion, then the long-term impact would have been severe – and it helps highlight the diverging financial environments in the Premier League and the Championship.
Norwich City took an alternative approach following relegation, attempting to reduce costs and are still marooned in mid-table mediocrity in the second tier.
Aston Villa, meanwhile, attempted a similar model to Newcastle – they actually spent significantly higher figures on player recruits – yet they must still negotiate a Championship play-off final if they are to return to the top flight.
In Charnley’s opinion, Newcastle would not have been able to secure promotion at the first attempt under Rafa Benitez had owner Mike Ashley not offered his “support and backing” to essentially bankroll what was a Premier League-financed club in the second tier.
The Sports Direct magnate provided the club with a £15m loan as a lump sum last term, taking the total figure he has given the Magpies in interest-free loans up to £144m.
In an official club statement accompanying the news United had filed their accounts yesterday, Charnley said: “After an, at times, challenging season in the Championship, everyone with the club was delighted when, with two league games remaining, we secured automatic promotion.
“Even taking into consideration the fantastic levels of support during our Championship season, such is the disparity in central broadcasting and commercial revenues between the Premier League and EFL, we are reporting a drop in annual income of almost one third.
“An immediate return to the Premier League was vital to restore the financial stability and future prospects of the club.
“With the support and backing of the owner we took what was, in essence, a financial gamble on securing immediate promotion.
“Statistics show how difficult this has been to achieve in recent times, with only five of the 18 teams relegated over the previous six seasons having come straight back up (one via automatic promotion and four via the play-offs).
“We were the only relegated club to achieve an immediate return to the Premier League.”
Newcastle’s wage bill in 2016/17 was almost three times that of Brighton and Hove Albion (£40.4m), and close to six times that of Huddersfield Town (£21.7m), the other two promoted sides.
That figure includes £30m in onerous contract provisions, essentially