Newcastle United's Financial Analysis: A Path to Recovery

The assignment discusses the financial performance of Newcastle United Football Club from 2012 to 2016. The club experienced significant growth in net profits, reaching £32.5m in 2015 due to a balance between turnover and operating costs. However, the club's relegation from English Premier League led to a substantial fall in sales revenue and net profit, dropping by 85% to £4.6m in 2016. The recommendation is to invest in star players, maintain low wages and salaries, increase revenues through sponsorships, and enhance internal business efficiency. The study concludes that understanding dashboard analysis will enable effective decision-making, suggesting increasing revenue via commercial catering and performing well in league matches.

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Name of the Student
Name of the University
Author Note

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Table of Contents
Problem statement pertaining to the performance of Newcastle United FC..............................2
Theory to Link Problem Statement............................................................................................2
Key data analytics or business analytics system........................................................................3
Critical analysis of the club’s performance................................................................................5
Recommendation........................................................................................................................5
Conclusion..................................................................................................................................6
References:.................................................................................................................................7

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Executive Summary:
Considering the historical figures, this club had its best placing back in 1999 when it stood at
the fifth position with respect to earning revenues among the football clubs, and second only
to Manchester United among the English football clubs. The club has been into some notable
achievements after its inception but which had somewhat faded away but in spite of that, it
has won a couple of titles in the 20th century. The performance of the football team in the
Premier League is also not satisfactory if the last few years are being taken into account.
Such a performance has resulted in the team’s relegation in 2015-16 season. As a result, the
fans were upset and they are no more interested to buy season tickets. If the basic doctrine
management performance is to assist the business organisation triggering their performance
with respect to operating cost and revenues. The report will therefore on the basis of the
problem statement find out the key data analytic system and analyse the data of the
Newcastle United FC and help in forming business strategies for its future operations which
will help the organization to run profitably. The organization should follow the
recommendation mentioned in this report to grow in its future.

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Problem statement pertaining to the performance of Newcastle United FC
Newcastle United FC is an English football club placed in the city of Newcastle upon Tyne
also known as Newcastle. This football club is an active participant of English Premier
League, which holds the apex rank in English football fraternity. Mike Ashley is the owner of
the club since the year 2007, by taking it over from Sir John Hall, owner and the chairman of
the club (Alexander and Kern, 2014). This football club is the 17th highest revenue generating
club around the globe with respect to annual revenue as it earned €169.3m in the year 2015.
If the current situation of the company is taken into account, the overall turnover of the club
is not showcasing a good increase considering the financial statement of the last five years.
Therefore the profit has also been low due to high level of cost of operation (Phillips and
Krasner, 2016). It is difficult for the management to control the expenditure on the salaries,
wages, amortisation and cost of security of the players which is resulting into less profit on
operation. Inadequate amount of revenue that was generating out of the tickets sold on match
days which is almost static since the year 2012 (Amir and Livne, 2015).
Theory to Link Problem Statement
Various organisations use different assumptions or theories in accordance with problem that
they are dealing with to find a way to address their performance. The club management is
required to execute brainstorming session on perspectives of costs of operation and accelerate
the turnover to move in the better margin of operation (Ryder, 2016). The theories on
management performance will help the club to materialise their business into action. The
most effective management performance tool in operation is Balanced Scorecard of Norton
and Kaplan. Given are the four perspectives of BSC in brief:
 Customer: The value of customer satisfaction is important in any form of business to
attain success. The customers’ perspective is concerned with the supporters who not
only play a major part in generating ticket revenue but also help in increasing their
number of followers over the internet or television. Therefore, a poor performance on
the part of the management is not going to increase the sales revenue which has not
been observed in the last five years.
 Finance: It is predominantly aimed at identifying the financial information or data
execute the on time and authentic performance of the organisation with respect to cost

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of operation, profits and revenue. The organisational position with respect to its
financial health may show the performance lagging with respect to the decisions taken
in the past, but yet it is very important.
 Process of internal business: This context is related to the degree of efficiency at
which the business is proceeding. It motivates the organisations to take a breather if
the performance of the company is not up to the mark and it acts in a little
philosophical way in handling the issues of the firm.
 Growth and learning: In the world of globalisation with rapid changes in
technology, it is important for the company management to be into incessant growth
and learning form. The mangers of the firm must take into account their player’s
performance with the help of a series of performance indicators like player attributes,
training performance and match ratings on an average.
To develop a business intelligence dashboard procedure will assist in measuring, managing
and monitoring the operational performance in detail periodically. For the managers and
accountants, these dashboards pertaining to operation and tactics can be handy to keep a track
on marketing, initiatives on tactics and performance on sales with the help of BSC.
Key data analytics or business analytics system
The technology used in data analytics plays an important role for the organization like
Newcastle United FC. There are several techniques and processing methods and its effected
use by the organization can provide relevant results which is required for strategic
management and implementation (Raghupathi & Raghupathi, 2014). There are certain key
technologies which can make big data analysis for the organization which are as follows:
 Predictive Analytics: The decision making process involves various risks and to
avoid such risks predictive analytics helps businesses. Hardware and software
solutions of the predictive analytics can be used in the processing of big data which
will discover, evaluate and implement predictive scenarios. Such predictive data can
help the organizations to be prepared about the risks that is going to come and will
help in solving the problem by analysing the risk and its impact on the organization
(Raghupathi & Raghupathi, 2014).

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 NoSQL Database: This is an efficient and reliable data management system which
store data on the basis of relational database tables and come across a various number
of storage noes.
 Knowledge discovery tools: This is a tool which helps in gathering big data for
businesses in a structured or unstructured basis and stored on multiple sources. These
discovery tools can track and utilise the information for the benefit of the organization
through various searches and knowledge (Raghupathi & Raghupathi, 2014).
 Stream Analytics: Many a times the organizations store their data on various
platforms and in various formats and through this stream analytics process it is helpful
to filter, aggregate and analyse such big data. The stream analytics process connects
with the external sources of data and help in the integration of such data in the flow of
the application (Raghupathi & Raghupathi, 2014).
 In-memory data fabric: This process or technique helps in the distribution of large
amount of data through system resources. This in turn helps the organization by
enabling low latency access and process big data on different connected nodes.
 Distributed storage: This technique helps from loss of big sources of through
replicated data over distributed file system. However, replication of data may be due
to low latency quick access over large network (Raghupathi & Raghupathi, 2014).
 Data virtualization: This helps in retrieving data from various sources of data and
distributed data sources within a very short span of time. This is one of the mostly
used technologies.
 Data integration: Data integration is tool which helps to allow the business enterprise
or organization in streamlining the data across a number of big data solutions. Many
organization faces the challenge of handling big data in such a way so that it can be
accessed and analysed when required. This tool helps in integrating such big data
(Raghupathi & Raghupathi, 2014).
 Data pre-processing: This is a software which helps in manipulation of data into
such format which can used for analysis. This tools helps in formatting and cleansing
unstructured data.
 Data quality: Data quality is the parameter for processing big data. The data quality
enrich the large data sets through a parallel processing system. This tool is used to get
consistent and reliable outputs from processing the data (Raghupathi & Raghupathi,
2014).

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Critical analysis of the club’s performance
The major issue that is concerned with the aspect of the turnover where the sales revenue on
the tickets is not satisfactory even though the revenue with respect to advertisement or media
has seen a rise (Jones, et. al., 2017). The high cost on operations and the low rate of turnover
had a serious impact upon the club considering the loss incurred in the year 2012 (£5m) and
2013(£1.7m). The club made a relatively better performance in the year 2014 with £4.8m and
a profit of £19.1m in 2015. The profit dipped sharply in the year 2016 to £0.9m. This is clear

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on the part of the column of Sparkline’s which indicates the different trends of parameters of
profit. Even though the net profit (after tax) did not fall negatively considering the club was
generating profit in consultation with the club players. This put the net profits to £1.4m in
2012 and £8.8m in the year 2013.the net profit of the firm increased to a significant extent to
£18.8m in 2014 and it went further to the tune of £32.5m in the year 2015. It was due to a
balance between turnover and operating cost. But in the year 2016, the club again witnessed a
big deal of loss as the net profit was dropped to the tune of 85% to a petty £4.6m (Jones, et.
al., 2018). The board did not go for dividend payments owing to such a low volume of net
profit. This was perhaps due to the club’s relegation from English Premier League as the club
stood at 18th position. Therefore, the disappointment among the club fans caused in a
substantial fall in the sales revenue as they were not interested to buy season or match tickets
like before.
Recommendation
To deduce, the club management must begin in investing star players. The players are
required to be trained on the basis of the growth and learning perspective of the BSC
(Balanced Scorecard) theory. It is also advised to maintain a low cost with respect to wages
and salaries so that the club can retain the maximum possible profit when the year ends.
Secondly, the firm must venture into marketing and strive hard to increase their revenues
with respect to sponsorships so that it helps in increasing the overall the turnover. Thirdly, the
management should emphasise on carrying on the internal business in a more effective and
efficient manner. Fourthly, the incumbent coach Rafael Benitez must utilize the talent of
young players so the club wins more and more matches and retains its position in the Premier
League.
Conclusion
Therefore, for the supporting staffs and mangers engaged with the team, it is recommended to
make a detailed study of the dashboard analysis as it will enable them to undertake an
effective decision making process. They should go for increasing the revenue via commercial
catering. They must resort to enhancing the revenue with respect to tickets by performing
well in the league matches and applying effective marketing strategies.

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References:
Alexander, D. L, and Kern, W. (2014) The Economic Determinants of Professional Sports
Franchise Values, Journal of Sports Economics, Vol. 5, pp. 51-66.
Amir, E. and Livne, G. (2015) Accounting, valuation and duration of football player
contracts, Journal of Business Finance and Accounting, Vol. 32, pp. 549-586.
Bell, A., Brooks, C. and Markham, T. (2017) Does managerial turnover affect football club
share prices? AESTIMATIO, the IEB International Journal of Finance
Dobson, S. and Goddard, J. (2016) The Economics of Football, Ed. 2, Cambridge University
Press, Cambridge.
Jones, D., Rawnsley, P. and Switzer, A. (2017) Annual Review of Football Finance, Ed. 21,
Deloitte Sports Business Group, Manchester.
Jones, D., Rawnsley, P. and Switzer, A. (2018) Annual Review of Football Finance, Ed. 17,
Deloitte Sports Business Group, Manchester.
Miller, P. (2017) Private financing and sports franchise values: the case of major league
baseball, Journal of Sports Economics, 8, 449-467
NUFC. (2017). Club files annual accounts. Viewed on 27th December, 2018. Retrieved from
https://www.nufc.co.uk/news/latest-news/annual-accounts
NUFC. (2018). Accounts filed for year ended 30th June 2017. Viewed on 27th December,
2018. Retrieved from https://www.nufc.co.uk/news/latest-news/accounts-year-ending-
30-june-2017
Phillips, J. and Krasner, J. (2016) Professional sports: the next evolution in value creation In:
Rosner, S. and Shropshire, K. L. The Business of Sports, Ed. 2, Jones & Bartlett
Learning, Massachusetts.
Raghupathi, W., & Raghupathi, V. (2014). Big data analytics in healthcare: promise and
potential. Health information science and systems, 2(1), 3.

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Ryder, L. (2016). Newcastle United's accounts - all you need to know about the club's
financial results. Viewed on 27th December, 2018. Retrieved from
https://www.chroniclelive.co.uk/sport/football/football-news/newcastle-united-
accounts-you-need-11146268
Wilkins, D. (2018). Newcastle United total revenues for 2017/18 season – We can now
confidently estimate. Viewed on 27th December, 2018. Retrieved from
https://www.themag.co.uk/2018/05/newcastle-united-total-revenues-2017-18-season-
can-now-confidently-estimate/