Newcastle United Financial Results 2023/24

The 2023/24 season marked Newcastle's seventh consecutive year in the Premier League and saw the club return to the Champions League after a 20-year absence.

Domestically, the season didn’t quite match their previous fourth-place finish. While they remained in the hunt for European spots throughout, Newcastle ultimately ended the season in 7th place. This finish would normally have earned them a Europa Conference League spot, but they were edged out by Manchester United, who secured the position by winning the FA Cup. In the domestic cup competitions, Newcastle made it to the quarter-finals of both the FA Cup and the Carabao Cup, but were eliminated in both.

In the Champions League, Newcastle faced an incredibly tough group, but they did have a standout moment when they defeated PSG 4-1 at St. James’ Park. Despite this memorable win, they finished at the bottom of their group.

Financially, Newcastle's position has undergone a significant transformation since the Saudi Public Investment Fund (PIF) became the majority shareholder, having now invested £400 million in the club. However, balancing this investment within the Premier League's Profit and Sustainability Rules (PSR) has proven challenging, especially after two years of heavy losses.

Overview of Newcastle's Financial Results 2023/24

With their participation in the Champions League, Newcastle’s turnover reached a record £320 million, a £70 million increase from the previous year.

As the club has grown, both staff costs and operating expenses have risen sharply. The added expenses from extra games and investments in the squad, meant they needed to generate £70 million in profit from player sales to reduce losses to £11 million.

Financial Highlights Season 2023/24:

• Record turnover of £320 million, a £70 million increase from the previous year, making it the highest outside the traditional Big 6.

• Champions League participation drove growth in all major revenue streams.

• UEFA distributions of £30 million were offset by a lower domestic league finish.

• Matchday revenue increased by 32%, boosted by three Champions League home games.

• Commercial revenue surged by 90%, partly due to a new partnership with PIF-owned Sela, valued at £25 million per year.

• Staff costs rose by 15%, while other operating costs increased by 63% to accommodate extra matches and revenue-generating activities.

• Profit on player sales reached £70 million, including the 'season end' sales of Anderson and Minteh,.

• The club reported a loss of £11 million, an improvement from the £69 million loss the previous year.

• A club-record £206 million was invested in new players, with Tonali, Barnes, and Livramento being the major signings.

• £16 million was spent on facilities, including the First Team Training Ground and the STACK fan zone.

• Equity funding of £97 million was raised to support the club’s ongoing growth.

Newcastle continues to challenge the Big 6. As of this report, they sit in 6th place, just two points off of a Champions League spot. They've also broken their trophy drought, clinching the Carabao Cup in a highly emotional win over Liverpool – their first domestic trophy in 70 years.

However, maintaining a balance between investment and on-pitch performance while staying within PSR guidelines is crucial. This was evident with the sales of Anderson and Minteh at the end of the season—two highly valued players. With no European involvement this season, it is likely the club will report another loss. Whilst they have more PSR headroom than they had at the end of season 2023/24, they may again need to sell players. The lower investment in the squad this year also signals a more cautious approach.

Turnover

With Newcastle returning to European competition after 20 years, it's no surprise that the 2023/24 season saw record turnover. At £320 million, this marks a £70 million increase from the previous season, making it the 15th highest in Europe. This is a massive jump from the £175 million turnover under Ashley. The club now ranks behind only the Big 6 in terms of revenue, and they are £50 million ahead of the next closest team, West Ham. However, this ranking could change next season due to the absence of European involvement.

As anticipated, all major revenue streams experienced growth last season, driven by UEFA distributions, Champions League home matches, and new sponsorship deals, including one with PIF-owned Sela.

Matchday Revenue

Newcastle's home ground, St James' Park, has a capacity of 52,405. Like all Premier League clubs, every league home match is sold out, with an average attendance of 52,211 last season, ranking 7th in the league. Several expansion options have been discussed, but the most likely plan is to build a new 65,000-capacity stadium in Leazes Park, which would overlap the footprint of St James' Park.

Champions League participation brought three sold-out home games, and with more high-profile matches, the average revenue generated per fan increased from £35.20 to £39.20, an 11% rise. This, in turn, contributed to a 32% increase in matchday revenue, bringing it to £50 million, the 7th highest in the league.

Their average revenue per fan is now the highest outside the big 6, although there is still a big gap between them and Manchester City, the lowest of the big 6.

Broadcast Revenue

Broadcast revenue primarily comes from central distributions by the Premier League, distributions by UEFA (if the club participates in European competitions, as Newcastle did), and revenue generated through the club's media platform.

67% of Premier League Broadcast Distribution for Season 2023/24 are shared equally among all clubs, with the remainder allocated based on league position (merit payments) and the number of televised live games (facility fees). Each league position adds an additional £2.8 million, and each live game generates around £900k.

As Newcastle's league position dropped by three places, their merit payments decreased, and with two fewer live games, their facility fees also saw a decline. Their total distribution amounted to £154.7 million, down from £164 million the previous season.

UEFA distributions are based on several factors. All clubs receive a participation fee of €15.64 million. Additional prize money is earned for wins and draws in the group stage, as well as for progressing through the knockout stages. A further sum is allocated based on a club's co-efficient, which is calculated from the club's European performance over the previous five seasons. Finally, there is a TV pool allocation, which depends on the country market size and the club's co-efficient.

This means that clubs with consistent European participation will earn more. Since Newcastle are participating in European competition for the first time in 20 years, they have no co-efficient. So, their earnings of £30 million, whilst significant, are lower than Manchester United's £50 million, despite United finishing at the bottom of their group and winning one game fewer,

Overall, Newcastle's broadcast revenue for the season reached £184 million, making it the 6th highest in the league.

Commercial Revenue

Commercial revenue, which includes sponsorships, retail merchandising, tours, and other activities, reached £86 million, nearly doubling the previous season's £47 million. This significant increase was driven by growth in sponsorship income from partners such as Sela, Noon, Fenwick, and Adidas, the release of the 'We Are Newcastle United' documentary, and improved operational models for retail and catering.

A standout was the 'front-of-shirt' sponsorship deal with Sela, which is reportedly worth £25 million per year, a substantial increase from the previous £6.5 million deal with Fun88. Since Sela is owned by the PIF, this deal has attracted special attention to ensure it aligns with market value, with no issues raised by the Premier League.

While Newcastle’s commercial revenue is the highest outside the Big 6, a significant gap remains. Arsenal, with the lowest commercial revenue among the Big 6, still generates 2.5 times more than Newcastle.

Staff Costs

With participation in the Champions League and significant player acquisitions, it’s no surprise that Newcastle's salary expenses rose in the 2023/24 season. At £218 million, they saw a 17% increase compared to the previous year.

Since the PIF acquisition, salaries have increased significantly. As CEO Darren Eales mentioned in the We Are Newcastle United documentary, "Investment in salaries = points." However, they still trail fellow challengers Aston Villa by approximately £40 million, but way ahead of other peers such as West Ham and Brighton who take a more conservative approach.

Amortization (the write-down of player acquisition costs) has also been rising, reflecting the £500 million invested in the squad over the past three seasons. Total staff costs are now roughly double the level they were before the PIF acquisition. However, as noted, revenue has also doubled, and this investment is, among other factors, contributing to success on the pitch.

Newcastle’s total staff costs are the 8th highest in the league, behind the Big 6 and likely behind Aston Villa, who have yet to publish their accounts. With total staff costs of £313 million, this amounts to 98% of their turnover. While this ratio is high, it is still only the 8th highest.

Profit on Player Sales

As mentioned, Newcastle relied on selling players profitably to remain compliant with PSR. The pre-season sale of Saint-Maximin generated around £15-20 million in profit, but the club needed more. Therefore, following the season, Minteh was sold to Brighton, and academy player Anderson was transferred to Nottingham Forest as part of a player swap that brought Vlachodimos to St James' Park. In total, these sales generated £70 million in profit, a sum no doubt carefully calculated to ensure compliance with PSR.

Newcastle is not alone in their reliance on player sales to stay within PSR guidelines. As shown in the chart below, total profit from player sales in 2023/24 saw an estimated 70% increase compared to the previous season.

Profit and Loss

The last two seasons both reported a loss before tax of £73 million. Whilst these losses are adjusted for PSR calculations (for expenditure on such things as women's game, youth team and their facilities), a repeat of this would have raised concerns on PSR compliance.

Although revenue increased by £70 million, total costs increased by a similar amount with staff costs up 15% and other operating expenses up 63%. due to the cost of extra matches and costs for other revenue-generating activities. This left them facing heavy losses again, hence the department of Minteh and Anderson. These end of season sales reduced losses to £11 million and meant that Newcastle complied with PSR.

So far, nine clubs have released their financial results for the 2023/24 season. As shown below, Newcastle's results are the firth highest.

Looking ahead, with no European involvement this season, turnover will likely drop. The new partnership with Adidas as kit supplier and the opening of the STACK fan zone, will offset this, however it is likely Newcastle will report a sizable loss, without further player sales.

Player Trading

Since the PIF acquisition, Newcastle have invested £500 million in players. This is a big jump from the 150 million they investment in the three years prior. Major signings including Isak, Tonali, Gordon, Barnes and Guimaras have no doubt lifted the performance on the pitch.

Looking over the last three seasons, Newcastle's £500 million investment is the sixth highest in the league. When factoring in player sales, their net spending (acquisitions minus sales) at £408 million ranks fourth in the league, behind only Chelsea, Arsenal and Manchester United, and way ahead of fellow challengers Aston Villa.

Football Debt

Newcastle's only external debt is a £49 million term loan. They also owe £160 million to other clubs for transfers fees payable, but this is offset by transfer fees receivable of £96 million.

Cash Flow

There has been little margin between Newcastle's revenue and operating costs which means they generate very low operating cash flows (cash flow before investments and new financing). As a result, they typically require external funding to finance investments in players and facilities.

They are however fortunate to now have a willing owner in the PIF, who is ready to invest significantly in the club, likely constrained only by the PSR rules.

Over the past three seasons, the club has generated only £24 million from operations, which is quite low by Premier League standards (though some clubs, such as Aston Villa, have had negative cash flows during this period). They have invested £305 million in the squad and £42 million in facilities, resulting in a shortfall of £323 million. This gap has been covered by nearly £400 million in new equity, part of which was also used to pay off existing debt.

The table also underscores the importance of cash flow, (even in the Premier League). At the bottom for operational cash flows are Everton and Nottingham Forest, both of whom, as we know, received points deductions for failing to meet PSR (Profitability and Sustainability) rules.

When comparing Newcastle to Aston Villa, who have followed a similar trajectory, the chart below illustrates that Villa’s investment is comparable—though slightly higher and spread over a longer period. Regardless, it highlights the level of investment needed to challenge the established Premier League clubs, knowing that in the Premier League, success is not guaranteed.

Financial Outlook

Newcastle, with arguably the wealthiest owners in football, undoubtedly have the financial means to invest. However, they must remain compliant with the Premier League’s Profitability and Sustainability Rules (PSR), which means they need to carefully manage expectations on the pitch. The situation is quite different from when Manchester City was acquired under similar circumstances, as they racked up over £700 million in losses while heavily investing in their squad.

The expectation is for consistent qualification for European competition, which will be essential given the club’s growing cost base. While they fell short in the 2023/24 season, their Carabao cup win over Liverpool guarantees them a place in the Europa Conference League qualifiers (the third tier UEFA competition). However, they will undoubtedly be aiming higher, with aspirations of making a return to the Champions League.

Further funds of £50 million have been provided by the shareholders this season, and the club states:

"Since the end of the accounting period, the ownership group led by PIF has continued to invest capital into the club to improve the financial position of the business. This continued investment is consistent with the shareholders' approach of long-term, patient investment."

Looking ahead long-term, a new stadium could also elevate the club to an entirely new level.

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