Profits and Dividends
The graph below shows the reported profits of Newcastle United.
This graph shows the profits made by the club each year since 1998. It also includes the amount paid out to shareholders in dividends each year.
It is clear that the club generally loses money. The best year was 2004 when the club made a profit of £215,000 (two hundred and fifteen thousand).
No one really wants the club to making a huge profit, the aim is to invest in the playing squad, or the ground. There is though a need to not lose money every year. The figures for 2006 and 2007 show how the club was spiralling out of control. In 2007 the last year Mercury Shepherd was running the club the loss was £32.9m or over £600,000 each and every week. The figure improved fantastically under the first year of Donkey being owner, but it was still as bad as any other year in the last 10, apart from 2007.
The total losses for the ten years shown was £134m. So in only ten years the club spent £134m more than it took in. The dividends were of course part of this. The total dividend payments for that period were £32.4m.
In the 2008 season just reported the loss is awful, even if it is hugely better than the year before. The main expenditure is of course player wages, and on top of that transfer fees. The wages were generally agreed when Shepherd was the man in control, and most of the transfers took place in July/August 2007 when Shepherd was still at the club. It is clear that the club has been living way beyond what it could afford, with losses for the last three years totalling £68m.
Donkey would seem to have stabilised the club, but the cost of this is that there is no money to be spent, as it was all spent in 2006 and 2007.
If the target is to break even, then somewhere along the line the outgoings must reduce by £20m, or the incomings increase by that amount, or some combination of the two. The potential to improve the incomings would look to be difficult, at least until the club qualify for the Champions League again. The potential to improve outgoings would look to be a better avenue. The bigger concern is that income may have dropped for the current season, with club shops being shunned, and match attendances being down.
In 2008 Newcastle had wages of £70m, Everton had wages of £45m. If we had had their wages we would have made a profit in 2008.
The club has been paying large sums in interest payments to banks. This should reduce by about £6m in 2009, which will help the results a lot.
In each of the last four seasons the club has lost a manager and had to pay them compensation, this is classified as an "exceptional" cost, even if it does seem to happen regularly. At some point the club will stop doing this and this will stop the money leaking out. The 2008 results show the £4.5m paid to get rid of Allardyce and his staff, it does not include any money that may have to be paid to Ronald for his "resignation".