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Newcastle United reduce operating losses despite relegation

Wed 30th Mar 2011 | Money & Finance

Newcastle United Limited today filed its annual accounts for the year end 30 June 2010.

The financial results reflect the impact of relegation to the Football League Championship and the refocusing of the Club’s finances that was required as a result. 

The Club made an operating loss for the year of £33.5 million, compared to £37.7 million in 2008/09.  The overall loss for the year after player trading was £17.1 million, compared to £15.2 million the year before.

Relegation to the Championship resulted in a 39 per cent reduction in turnover, from £86.1 million in 2008/09 to £52.4 million in 2009/10.  The greatest reduction was in TV and Media revenue which fell 57 per cent, from £37.6 million in 2008/09 to £16 million in 2009/10.

However, whilst most revenue streams fell by a significant amount, gate receipts improved.  Despite relegation, over one million fans visited St James’ Park during the 2009/10 season, with an average league attendance of 43,388, the fourth highest football attendance in England.

The Club also managed to secure new key sponsorship deals with Puma as kit supplier and a long-term extension with its shirt sponsor Northern Rock, which will help the Club build its commercial and sponsorship revenues in the years to come.

In response to the reduction in turnover, the operating expenses of the Club were tightly managed to ensure that it operated within the limits of its financial resources, whilst striving to secure promotion back to the Premier League at the first possible opportunity.

The Club achieved a 24 per cent reduction in operating costs, from £98 million in 2008/09 to £74.4 million in 2009/10.

There was a significant restructuring of the playing staff, with the aim of maintaining the core of a Premier League squad capable of securing promotion.  Whilst a number of players left during the summer of 2009, the club retained the vast proportion of its squad and strengthened it further in the January 2010 transfer window with the acquisition of Danny Simpson, Mike Williamson, Wayne Routledge and Leon Best.

Wage costs were reduced by 33 per cent, from £71.1 million to £47.5 million, but the Club’s overall wage costs remained consistent with Premier League status.  The wages to turnover ratio increased to 90.6 per cent in 2009/10, up from 82.6 per cent in 2008/09. 

Newcastle United’s Managing Director Derek Llambias said: “Our overriding aim in 2009/10 was to secure promotion back to the Premier League at the first attempt. Relegation presented a considerable challenge for us financially. 

“With such a marked reduction in turnover, largely due to reduced TV and media revenue, we needed to cut our operating costs accordingly without jeopardising our ability to return to top flight football straight away.  We succeeded in reducing our wage bill considerably whilst maintaining the basis of a Premier League squad. 

“It has been a significant achievement to keep our overall loss at a level similar to the year before despite the impact of relegation, and our ability to do this has been helped  immeasurably by the continued financial support of Mike Ashley, who injected a further £42 million into the Club last year interest-free.“

   
The overall level of debt between the start and end of the financial year remained at £150 million. However the level of bank borrowings fell by £25 million and this was replaced by a £25 million increase in loans from the Club’s owner, Mike Ashley.  All loans from Mike Ashley, which totalled £139.8 million at the year-end, have been and remain interest free.

In addition, the owner advanced a further £13 million to the club to finance the amounts due from other football clubs in respect of the transfer of players’ registrations. 

The full annual accounts, including the financial statements of the Group and the Independent Auditors’ Report for the year have been submitted to Companies House today.

Results in focus  

Turnover             

2009/10 Results

2008/09 Results

% Change     

Total Turnover

£52.4 million  

£86.1 million  

(39%)  

Season Ticket Revenue     

£11.0 million   

£15.6 million   

(29%)   

Gate Receipts                    

£6.5 million    

£5.5 million    

(18%)     

Corporate Hospitality         

£2.8 million                

£6.7 million    

(58%)  

Other Matchday Receipts

£0.7 million   

£1.2 million   

(42%)  

TV and Media Revenue   

£16.0 million  

£37.6 million  

(57%)  

Commercial, Catering & Sponsorship

£15.4 million          

£19.4 million                       

(21%)  

 

Operating Expenses

2009/10 Results

2008/09 Results

% Change      

Total Expenses 

£74.4 million  

£98.0 million  

(24%)  

Wage costs     

£47.5 million  

£71.1 million  

(33%)  

Other Expenses 

£26.9 million  

£26.9 million         

 

Wages to Turnover %    

90.6%  

82.6%          

 

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