Newcastle United Post Strong Financial Results
Fri 9th Mar 2012 | Money & Finance
Newcastle United’s balance sheet goes from strength to strength as its latest annual accounts for the year end 30 June 2011 show operational losses were down nearly £30m on the previous year.
2010/11 was a landmark year for the Club financially, achieving close to break-even for the first time in its recent history, whilst at the same time retaining and building a strong squad which is currently sitting sixth in the Premier League.
The overall operational loss for the year after amortisation was just £3.9m, compared to a loss of £33.5 million in 2009/10 and £37.7 million in 2008/9.
Promotion to the Premier League resulted in a 69 per cent increase in turnover, from £52.4 million in 2009/10 to £88.4 million in 2010/11, principally the result of a three-fold increase in TV revenue.
Ticket sales revenue rose 16 per cent, from £20.9 million in 2009/10 to £24.3 in 2010/11, largely the result of an increase in corporate hospitality income associated with the Club’s return to the Premier League. Just under a million fans visited the stadium in 2010/11, the third highest attendance in the country.
The Club has worked to bring its wages-to-turnover ratio down to a long-term sustainable level. In 2008/9 wages accounted for 82.7 per cent of turnover, rising to 90.5 per cent in the Championship season 2009/10. For the year 2010/11, wages accounted for 60.6 per cent of turnover.
The net cash spend on player transfers to June 2011 was a receipt of £5.4 million, which includes the fee for the sale of Andy Carroll to Liverpool FC in January 2011. The Club has since spent a further £25 million in cash on players and wages.
The Club has introduced a strict policy in respect of player transfers, with the emphasis on paying and receiving full transfer fees up front rather than accepting dated payments over a number of years. When Mike Ashley acquired the Club in the summer of 2007, he inherited outstanding deferred transfer payments totalling £36 million for players past and present. Under the new policy, the Club is now owed £5 million.
With the financial support of the owner Mike Ashley, the Club has now cleared all of its third party debts, which stood at £76 million in 2006/7 and incurred finance costs of £6.5 million. The debt to Mike Ashley remains £140 million, which continues to be provided interest-free by the owner.
Newcastle secured a new two-year shirt sponsorship deal with Virgin Money in January 2012 and announced plans to sell full naming rights to the stadium in order to maximise potential revenue streams.
Newcastle United's Managing Director Derek Llambias said:
"The Club’s financial results for the year end June 2011 are extremely strong. We can now count ourselves amongst very few clubs across the UK and Europe who are operating at close to break-even. What is particularly pleasing is that we have achieved this whilst also ensuring we have a strong squad sitting firmly in the top third of the table and currently pushing for a European place.
“Some of the key financial principles we set in place when Mike bought to the Club back in 2007 are now beginning to reap rewards. Most notably, our adherence to a strict transfer policy which avoids, or limits wherever possible, the acceptance of dated payments for players bought or sold. We believe it is a far healthier financial model to settle full transfer fees for players up front, not dated over a period of years.
“We have dealt wisely in the transfer market and reinvested the income received from player sales into improving the squad. Our net cash spend on player transfers to June 2011, which includes the sale of Andy Carroll, was a receipt of £5.4 million, with a further £25 million in cash spent on transfers and players’ wages since June 2011.
“We have also worked hard to address an inherited wages-to-turnover ratio which was unsustainable. Wages now account for just over 60 per cent of turnover and we feel this is a healthy and affordable level.
“A further significant achievement has been to clear all of the Club’s interest-bearing debt, which in 2006/7 was costing £6.5 million a year just to finance the debt. Mike Ashley continues to provide loans totalling £140 million interest-free, for which we are extraordinarily fortunate. Once again, Mike has not taken any money out of the Club.”
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.
Posted by: Aaron Gourley
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