Financial Results

Newcastle 2017: Lovely Jubbly


Mike Ashley, Newcastle’s colourful owner, has finally submitted the club’s accounts for the year ended 30 June 2017 for public scrutiny.

In first announcing a selected set of information from the accounts on the club’s website Ashley has laid himself open to accusations of trying to massage the message from the club’s season in the Championship.

Kind words are in short supply in Tyneside for Ashley, who bought the club in May 2007 and has overseen two relegations during that period.

Easy to criticise, and hard to love, but is Ashley as bad as some make out, given that he has lent the club over £140 million interest free, and invested a similar sum in buying share in the club too?

A look at the accounts suggests that the bleak picture painted by the press announcement last weekend perhaps overegged the pudding in terms of just how big a gamble the club took last season in incurring record losses of over £90 million.


Starting at the top of the income statement, Newcastle had total revenue of £85.7 million, a record for a club in the Championship, but nearly a third less than the previous season in the Premier League.

Having a lot of money is one thing, and Newcastle have earned exactly £900 million under Ashley’s ownership, but putting it to good use is another, and Toon fans will question a lot of the decisions made in how that money has been utilised.

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Looking at the breakdown of the income total, the biggest contributor is broadcast income from the Premier League in the form of parachute payments.

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Earning Newcastle £40.9 million in 2016/17, parachute payments, which worked out at 55% of the Premier League’s ‘Basic Award’ (the part of the broadcast deal that is split evenly between clubs, aim to cushion the blow of relegation when clubs have players on Premier League contracts which otherwise would be difficult to fulfil in the Championship (or, in the case of Sunderland, League One).

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Year by year parachute payments fall, from 55% of the basic award in the first year outside the Premier League, to 45% in year two and 20% in year three.

Income from broadcasting in the Championship for non-parachute payment clubs is a basic of about £6.5 million a year, plus £100,000 for every home match shown live on Sky.

Some of the Championship broadcasting income (about £2.3 million per year in the Championship) comes from ‘solidarity payments’ from the Premier League, which is an annual handout to the 72 clubs in the Football League.

A huge gap therefore exists between those clubs in the Championship earning parachute payments and those that do not.

Fans of parachute payments point out that it allows clubs to negotiate long term contracts with decent players who might otherwise go elsewhere if there are large wage reductions clauses in their contracts.

Allowing clubs three years (or two if they are promoted and immediately relegated, such as happened to Middlesbrough in 2016/17) means that there doesn’t need to be a fire sale of player of the calibre of JonJo Shelvey if a club goes down.

This allows a club relegated to regroup and familiarise itself with the financial constraints of the Championship and reduce the risk of going into administration.

Critics of the parachute payment system claim that it gives clubs relegated from the Premier League an unfair advantage over their rivals.

Only one club in receipt of parachute payments in 2016/17 was promoted though, and that club was Newcastle, Norwich finished 8th and Villa 13th, despite also receiving nearly £41 million from the Premier League.

Commercial income for Newcastle in 2016/17 was £14.8 million, down from £28 million the previous season.

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Knockers of Ashley will point out he uses St James Park as an advertising vehicle for his Sports Direct cheap and cheerful sports emporium, and he should be generating more commercial income than any other club in the division.

Newcastle fans take the view that they should be earning far more commercial money given the history, heritage and size of the club, but it already is fairly competitive with many in the Premier League whose matches are broadcast around the world each week and who generate vastly bigger viewing figures than those teams in the Championship.

Earnings from matchday sales were maintained due to Newcastle fans turning up every week and average attendances at St James Park were an amazing 51,108, beaten by only five teams in the Premier League.

You must give respect to Newcastle fans for turning up in numbers as matchday income at St James’ Park was twice that of any club in the Championship as crowds averaged 51,000.

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Wages are a club’s biggest expense, and Newcastle spent a record amount of £112.2 million in 2016/17, up 50% from the previous season in the Premier League, but this headline sum includes some one-off costs.

A sizeable chunk of the wage bill (£9.9 million) was paid for promotion bonuses and a further £22 million was for players who were not considered part of the first team and so had their contracts paid up or went on loan with NUFC picking up some or all the wage bill.

Nevertheless, even if these figures are excluded the wage bill would have been over £80 million, compared to the average Championship figure of £29.8 million.

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Kowtowing to Mike Ashley as Newcastle United Ltd.’s only director is Lee Charnley, who earned ‘only’ £150,000 for his services in the year and waived his right to a bonus.

Every club needs a front man and Charnley acts as the interface between unhappy Toon fans and the Ashley.

Rightly or wrongly, Charnley is seen in as bad a light as Ashley on Tyneside but his pay is far lower than that of other football executives, with the average in the Premier League being £1,008,000 a year and some other CEO’s in the Championship earned seven figures too.

The other major cost is transfer fee amortisation. This is how clubs deal with the sums paid for player transfers. This is achieved by spreading the cost over the contract life. So when Matt Ritchie was signed in the summer of 2016 from Bournemouth for £11million on a five year contract, this works out as an amortisation charge of £2.2 million (11/5) a year.

The total amortisation cost incurred by Newcastle was £35.8 million, far higher than that of any other club in the division. This also reflects ‘impairment charges’ which is when the club writes down player values in the accounts when they are a bit rubbish. The sum involved within the amortisation figure is not shown, but I’m sure Toon fans can name the players and the manager(s) who signed them.

Amortisation is not however a cash cost, so there’s a case for treating it cautiously when looking at the figures.

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Profits are income less costs, and here the club has been disingenuous by promoting in the press release a £91 million loss figure. However, this is before considering gains on player sales of over £42 million and includes the non-recurring costs from promotion bonuses and the contract write ups.

If you strip out the one-off costs and income and exclude amortisation claiming it is a non-cash expense, we get to something called EBITDA (Earnings Before Interest Tax Depreciation and Amortisation). This is the profit most focussed on by analysts, at it is a sustainable cash equivalent of profit.

This gives a figure of £19.8 million, still sizeable but far less than the sum being touted by the club to the media when the results were announced.

Newcastle made substantial EBITDA profits in previous years so were able to absorb this loss reasonably easily.

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There is no chance of Newcastle being subject to Financial Fair Play sanctions from the Football League as promotion bonuses are excluded and gains on player sales included when calculating FFP losses.

Player trading

Mike Ashley’s reluctance to spend money in the transfer market is legendary. In the period since he bought the club he has spent £308 million on players (less than what Mourinho and Guardiola each spent in their first 15 months in charge) and raked in sales income of £244 million.

This gives a net spend of just £65 million over the period.

Last season in the Championship Newcastle bought players for £41 million in the shape of Ritchie, Gayle, Yedlin and Clarke, but managed to rake in £70 million from selling Sissoko Wijnauldum and Townsend.

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Compared to the rest of the division Newcastle certainly spend big, but it was less than half the sums paid by Villa, who finished far down the table.


Mike Ashley lent the club a further £15 million during the year, taking his total interest free loans to £144 million. The club also had an overdraft at 30 June 2017, presumably used to pay the promotion bonuses, but this overdraft would have been wiped out when the Premier League broadcast income for 2017/18, which eventually totalled £123 million started to flow to the club.

In addition to the loans Ashley has invested a further £134 million in shares in the club, taking his total investment to £278 million. Rumour is he is trying to sell if for £400 million, but this price looks optimistic for a business that realistically has a 1 in 4 chance of losing its main source of income (PL TV money) at the start of each year.


Newcastle under Mike Ashely did take a gamble in investing in players in 2016/17 to engineer a return to the Premier League, but not as much as the club has claimed.

The motive of this spending is however unclear, we estimate the value of NUFC as a Championship club to be £80-100 million, but as a Premier League club it is £270-£800 million.  Ashley could therefore be seen to be protecting the value of his investment in the club by funding the promotion push, and once back in the Premier League returning to his more stingy spending style.

Astute management from Benitez combined with canny signings on players who have a good resale value during the season helped them bounce back.

What happens next with Mike Ashley at the helm is unknown, he is the football Fog on the Tyne and it won’t lift until he leaves.

The data

The trainspotter's trainspotter of football finance.


  • Biffa

    I think the 22m wage cost is the HMRC provision any player contract impairment would go through as part of “Amortisation and impairment of plazers registartions”

    • The Baron

      I can see where you are coming from but the notes in the accounts specifically state the provision related to contracts not HMRC, which is buried within the £25m accruals total.

      • Biffa

        on reread of the accounts the 22m will probably include both the onerous contract provision and HMRC provision so the real wage for 2017 is probably 22m lower than reported

  • Steven

    I agree, great analysis.
    I also agree that Mike Ashley has made numerous mistakes and his time in charge has seen the club relegated twice and the team he inherited had been regulars in Europe.
    I just get narked when fans say things like “Ashley is taking money out of the club”. That is simply not true and the accounts back this up as fact. He put in another £15m last year and the amount he’s lent to the club during his failing time here has been £144m. It’s fair to argue that he might have gained that in free advertising too though.
    Lastly I think it’s fair to say that the statements he releases with the headline “every pound generated by the club will be available to Rafa” are accurate and backed up by these financial results and previous accounts too. Therefore there is no reason to believe that he will not continue to do this as that was the line of his latest statement.
    With the extra revenue from this years premier league pot (£124m) compared to the £47m last year and you would imagine that the commercial revenue should be back to where it was in 2015/16 so about £15m more, the club should be able to back Rafa up with about £60m-£80m without any investment from Ashley this summer and if they sell the likes of Mitrovic, Gayle, Sels, and Saivet, that could also realistically be in the kitty for this summer too.
    I like to be optimisitic. Hopefully Newcastle can prove me right.

    • The Baron

      He’s not Satan and he’s not Father Christmas either. All that money interest free has been beneficial to the club.

  • Franky 33

    The saving on interest foregone on the loan is more than offset by the loss of commercial income.
    The value of commercial links with the club is undermined by its links with Sports Direct. NUFC is seen as part of the Sports Direct empire due to the proliferation of free advertising for that company around the ground. Few businesses would want their brand values conflated with those of Ashley’s sports retailer

  • Kenny O

    Steven I agree, it narks me also when people mistakenly say that “Ashley is taking millions out of our club”. The Accounts have shown year in, year out that he has not.
    However there is a considerable loss in revenue in advertising – we are synonymous with Sports Direct it seems – this is an avenue which should be looked into improving – by Director Lee Charnley.
    If ALL monies generated are given to Rafa how can we generate more?
    We have to look at that avenue.
    Surely a “war-chest” of £80m is good enough to bring in 4 players – If we can get £20m for Mitro and £10 for Gayle, then were talking a serious investment in the summer!
    One final note – the £144m which Ashley is owed is, in my opinion, the reason he has upped the sale value of NUFC. As he will want that back…..unless its incorporated in the sale.
    From £250m to £400m (£150m – you do the math – as the yanks say!)

  • Dave Kuik

    Thank you Prof. Maguire,

    An exceptional analysis, and a honest, informed, and educated opinion.

    I appreciate your sterling research, and that you have released this for public viewing.

    You are a credit to all football supporters for delivering a ‘real’ prognosis, as opposed to the ‘manipulated’ release that has been delivered by my Club, in it’s contempt for it’s own supporters.

  • ChrisB

    One figure we don’t see is the management cost and margin (clip of the ticket) that Sports Direct make for for running the Club shops, procuring and selling the merchandise etc, Given that Ashley owns over 50% of Sports Direct, he will indirectly be getting some pay back. An accountant could probably have a stab at what it makes for SD and what Ashley gets in dividends. Probably not that material, but he does get something back.

    And to note points made earlier, if all the Sports Direct branding generates no income for the Club the notional value to SD and hence Ashley also has a value.

    Broadly I’d say I share the sentiments of the Baron.

  • Hedgey LFM

    IF only Mr Cashley was a TOON supporter….. we could be in the mix season after season defending that elusive silverware !

  • Bob

    The piece around the write downs / impairments is interesting. How is that calculated? Seems like a subjective opinion to value a footballer, given that a footballer is worth what someone will pay for them (see Sissoko for more details) or is it calculated on the transfer fee paid vs an assumption of zero value?

    In the company I work for we also have impairments / write downs for assets. It is standard practice to declare these in accounts in years when the finances are worse, just exaggerating the overall losses. I presume this is for tax reasons but am not sure. I wonder if something similar is going on at nufc.

    • The Baron

      Write downs of player values usually occur if there’s been a major event happening to the player (career ending injury, or being sent to train with the youth team by a new manager, as happened to Schweinsteiger at Manchester United as player not part of their plans). Also arises if major event to club as a whole. Villa had a huge impairment when relegated to Championship etc.

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