Newcastle Narrows Loss as Broadcast Income Helps Soccer Club

Newcastle’s fiscal year loss narrowed following the English soccer team’s return to the Premier League and the sale of striker Andy Carroll for a record fee to Liverpool last season.

The team, owned by Sports Direct International Plc founder Mike Ashley, reported an operating loss of 3.9 million pounds ($6.2 million) in the year ended June 30 compared to a loss of 33.5 million pounds in the year-earlier period, according to a statement on its website.

Newcastle is sixth in the league in its second season back in the English top division. Manager Alan Pardew made over the team following the exits of Kevin Nolan, Joey Barton and Carroll, who was sold for 35 million pounds. The striker’s replacement, Demba Ba, has 16 goals in 21 league games after arriving on a free transfer.

“We can now count ourselves amongst very few clubs across the U.K. and Europe who are operating at close to break-even,” Managing Director Derek Llambias said. “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.”

Its accounts have yet to be published by Companies House. Sales rose 69 percent to 88.4 million pounds because of the higher television income available in the Premier League, the Magpies said.

Ashley bought the team in 2007 from local businessman John Hall. Since then, he’s tried to run the club on a commercial basis, which has at times sparked fan anger. He was jeered by some sections when manager Kevin Keegan quit in September 2008 following a dispute over player trades. Recently he was criticized for rebranding St James’ Park as the Sports Direct Arena.

Transfer Policy

“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,” Llambias said.

Rivals teams often agree multi-year payment structures when they trade players. The European financial crisis has led to some clubs being unable to pay debts when they become due. European soccer’s governing body UEFA said about 100 million euros ($132.6 million) in transfer fees were either unpaid or deferred last year. Ashley inherited unpaid player transfer costs of 36 million pounds. Newcastle is now owed 5 million pounds, the club said.

“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,” Llambias said. “We have dealt wisely in the transfer market and reinvested the income received from player sales into improving the squad.”

Wage Ratio

Newcastle said its ratio of wages to revenue fell to 60.6 percent for the 2010/11 season from 90.5 percent a year earlier. Llambias said the team made a profit of 5.4 million pounds from player sales to June 2011. Since then a further 25 million has been spent on player acquisitions and wages, including the arrival of Papiss Cisse from Freibourg for around 10 million pounds.

The team said Ashley had paid all third-party debts, which totaled 76 million pounds in the 2006-07 seasons. He’s injected a further 140 million pounds in interest free loans. The club hopes to boost its finances further by selling the naming rights, saying the Sports Direct title is to show potential buyers how the stadium could be branded.

To contact the reporters on this story: Tariq Panja in London at tpanja@bloomberg.net

To contact the editor responsible for this story: Chris Elser at celser@bloomberg.net

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