Newcastle United quietly released their financial numbers for the last twelve months yesterday and it did not make for pretty reading as Mike Ashley suffered losses of £34 million in his first 12 months as club owner.
Newcastle’s revenues for the twelve months were an impressive £100 million. The big problem is that Newcastle spent an amazing £73 million on player wages. I don’t think that anyone can be profitable with a 73% wages-to-turnover ratio. Some comparisons to that 73% number is that under their respective collective-bargaining agreements, NHL players receive about 56.7% of revenue, NBA players about 57% and NFL players about 59%. Newcastle need to get their ratio down below 60% if their are to become profitable.
Newcastle’s numbers were actually worse than they appear! The £34 million loss has been offset by a player-trading profit of £10.8 million. That means that that total expenses for Newcastle are around £145 million (34 million loss + £10.8 million trading profit). When Mike Ashley bought Newcastle who cleared the club’s £160.7 million of external debts and has not been charging interest on these “soft loans”. So if debt payments had been made at the rates specified in the takeover agreement, then Newcastle would have had to pay Ashley £5.6 million in the last twelve months. If that debt payment had been made, then Newcastle’s expenses would have been around £151 million, giving them an actual loss of around £51 million
As Arsene Wenger said recently, a football team gets money three ways; gate receipts, sponsorships and TV money. The TV revenue stream is based upon Newcastle staying in the Premier League. Newcastle’s current league position of two points above the relegation zone and without a win in six matches means that relegation would be a financial disaster to Newcastle and would cause a fire sale of players in the summer.
For Newcastle to get on a sold financial footing they need to slash player costs (ie get younger and cheaper) and stay in the Premier League. If Joe Kinnear can do that, he deserves a new contract.