The directors present the strategic report for the year ended 30 June 2024.
The Group made a loss for the year of £3.3m (2023 – £2.4m).
Off the field we continue to develop both our commercial and conference & events activities and would like to thank the ongoing support of our incumbent and new commercial partners. Our conference & events business continued to expand in 2023/24 and furthermore in 2024/25 with events being hosted at Kingston Park, Hexham Racecourse and beyond.
We also welcome our continuing good relationship with Newcastle United Women’s Football Club as we host both the day-to-day operations and matchdays throughout their season.
Newcastle Rugby Foundation, our charitable arm, continues to develop and expand its work to make rugby the positive difference that changes lives for good, and this is something that the club will continue to support wholeheartedly.
On the field, Newcastle Falcons had an incredibly tough year, finishing 10th in the Premiership table, with 6 wins. The club continues to have a young and ambitious squad with international representation across all age groups.
Newcastle Thunder
Despite a number of years of support from the group and tireless effort from club staff, fan engagement has continued to show little growth and as such the decision to part company with Newcastle Thunder was made.
On a positive note, this has allowed the Group to concentrate efforts on the core business of Newcastle Falcons RFC and our conference & events business. Furthermore, Newcastle Thunder have been re-admitted to RFL Betfred League One under new ownership. As a Group, we welcome the opportunity to host their forthcoming seasons games, and wish the new ownership every success for the future.
This season continues to be a challenge for the club and business both on and off the pitch. With a further
reduction of premiership clubs and home matches meaning reduced match day income.
This meant the Gallagher Premiership is now competed for by 10 clubs.
This has caused others to take a hard look at club finances and Newcastle Rugby has taken significant steps
towards a more self sustaining model. This will continue to come into fruition in the 2024/25 season and beyond.
Management believe this emphasis on financial sustainability coupled with the continued investment into young,
home grown talent will be something our faithful support can rally behind in the future months and years.
Our Academy continues to flourish, and we are incredibly proud of our academy programme. We continue to nurture
and develop young talent in the region. Our record of producing home-grown players who are ready to succeed,
both on and off the pitch, continues through the work of our experienced, skilled, and enthusiastic Academy team.
Principal risks and uncertainties
The management of the group and the execution of the group's strategy are subject to a number of risks. The board reviews these risks and puts in place policies to mitigate them.
The key group and financial risks are:
Employees
The group's performance depends largely on its employees, the loss of a key squad member could have potentially adverse effects on the business. Players are encouraged to remain at the club, with a competitive pay and benefits package. Strict training regimes and diets are put in place and in order to reduce the risk of injuries throughout the squad, physiotherapists and sports scientists are employed.
Environment, health and safety incidents
Appropriate measures are implemented to minimise the risk of any environmental and health and safety issues.
Interest rate risk
The maturity profile of the group's financial instruments that are exposed to interest rate risk is disclosed in the financial statements.
Liquidity risk
The directors regularly monitor the financial information to ensure that any risks in this area are considered on a timely basis.
The group measures performance using both financial and non-financial KPIs. The directors consider the following to be the key measure of the group's performance:
Turnover for the year £8.6m (2023 - £11.2m)
Profit/(Loss) for the year (£3.3m) (2023 - (£2.4m))
Net liabilities £23.9m (2023 - £20.6m)
Average league attendance 23/24 - 4,878 (22/23 - 5,611)
League finish 23/24 - 10th (22/23 - 11th)
The directors are satisfied with the KPI's achieved given the current economic climate.
The directors of the Group must act in the way they consider, in good faith, would most likely promote the success of the Group for the benefit of its members as a whole, and in doing so have regard (amongst other matters), to:
Likely consequences of any decisions in the long-term;
Interest of the Group’s employees;
The need to foster the Group’s business relationships with suppliers, customers and others;
The impact of the Group’s operations on the community and environment;
Desirability of the Group maintaining a reputation for high standards of business conduct; and
The need to act fairly as between members of the Group.
In discharging their Section 172 duties, the directors of the Group consider that they have had regard in material respects to the factors set out above.
The key stakeholders of the Group are our fan and customer base, the local community, our suppliers, employees, and the Group’s shareholders.
The directors are committed to creating a sustainable business whilst delivering the best experience for fans, and to compete at the highest level of English Rugby. The relationships between suppliers, partners and customers is key to the success of Newcastle Rugby, with regular dialogue to ensure that the relationships are working for all parties. Fan forums are held to ensure that improvements are continually made so the best experience is delivered to our suppliers and customers.
In considering items of business, the Group makes autonomous decisions on each transaction’s own merits, after due consideration of the long-term success of the Group, Section 172 factors, where relevant, and the stakeholders impacted.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2024.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In accordance with the company's articles, a resolution proposing that Sumer Auditco Limited be reappointed as auditor of the group will be put at a General Meeting.
The financial forecasts have been reviewed by the Directors and they have concluded that investment is required to ensure the company is a going concern. Immediately following the approval of these financial statements, control of the Company is to be transferred to Red Bull GmbH. Prior to the approval of the financial statements, Red Bull GmbH had confirmed they intend to support the club financially for the foreseeable future, therefore the financial statements have been prepared on a going concern basis.
We have audited the financial statements of Newcastle Rugby Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2024 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Discussions with and enquiries of management and those charged with governance were held with a view to identifying those laws and regulations that could be expected to have a material impact on the financial statements. During the engagement team briefing, the outcomes of these discussions and enquiries were shared with the team, as well as consideration as to where and how fraud may occur in the entity.
The following laws and regulations were identified as being of significance to the entity:
Those laws and regulations considered to have a direct effect on the financial statements including UK financial reporting standards, Company Law, Tax and Pensions legislation, and distributable profits legislation.
Those laws and regulations for which non-compliance may be fundamental to the operating aspects of the business and therefore may have a material effect on the financial statements include health & safety and salary cap regulations as well as UK alcohol licensing laws.
Audit procedures undertaken in response to the potential risks relating to irregularities (which include fraud and non-compliance with laws and regulations) comprised of: inquiries of management and those charged with governance as to whether the entity complies with such laws and regulations; enquiries with the same concerning any actual or potential litigation or claims; testing the appropriateness of journal entries; and the performance of analytical review to identify unexpected movements in account balances which may be indicative of fraud.
No instances of material non-compliance were identified. However, the likelihood of detecting irregularities, including fraud, is limited by the inherent difficulty in detecting irregularities, the effectiveness of the entity's controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to detect than irregularities that result from error. As explained above, there is an unavoidable risk that material misstatements may not be detected, even though the audit has been planned and performed in accordance with ISAs (UK).
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The Profit And Loss Account has been prepared on the basis that all operations are continuing operations.
Newcastle Rugby Limited (“the parent company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Newcastle Falcons RFU, Kingston Park, Brunton Road, Newcastle upon Tyne, NE13 8AF.
The group consists of Newcastle Rugby Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention modified to include the revaluation of investments. The principal accounting policies adopted are set out below.
Newcastle Rugby Limited, as an individual entity, meets the definition of a qualifying entity per FRS 102 and has taken advantage of the exemption available in paragraph 1.12 of FRS 102 from presenting a company-only statement of cash flows. These consolidated financial statements include a consolidated statement of cash flows which include the cash flows of Newcastle Rugby Limited.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes.
The consolidated group financial statements consist of the financial statements of the parent company Newcastle Rugby Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 30 June 2024. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The financial forecasts have been reviewed by the Directors and they have concluded that investment is required to ensure the company is a going concern. Immediately following the approval of these financial statements, control of the Company is to be transferred to Red Bull GmbH. Prior to the approval of the financial statements, Red Bull GmbH had confirmed they intend to support the club financially for the foreseeable future, therefore the financial statements have been prepared on a going concern basis.
Turnover represents income receivable from the group's principal activities and is exclusive of value added tax.
Match day receipts are recognised on the day of the game, with season ticket and hospitality box income being spread over the course of the season.
Sponsorship and similar income is recognised over the duration of the respective contracts.
Centrally distributed income arising from broadcasting revenue is recognised over the duration of the playing season. During year ended 2022 the group received funds relating to the group's share of commercial income for the following 4 year period. This is recognised within income evenly over this period, which is in line with the group's legal entitlement.
Commercial income is recognised as goods and services are supplied. Amounts relating to future accounting periods are carried forward within accruals and deferred income.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans and other loans are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
The tax expense represents the sum of deferred tax.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received, if considered material to the financial statements.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
The group operates a defined contribution pension scheme covering a number of its permanent employees. The scheme funds are administered by trustees and are independent of the company's finances. The group's contributions are charged against profit in the year in which contributions are made.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases are charged to profit and loss as they fall due.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) that have had the most significant effect on amounts recognised in the financial statements.
In assessing whether there have been any indicators of impairment in assets, including fixed asset investments, the directors have considered both external and internal sources of information such as market conditions and experience of recoverability. There have been no indicators of impairments identified during the current financial year, in particular with regards to the investment in shares held in PRL Investor Limited.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The group depreciates tangible fixed assets over their estimated useful lives. The estimation of the useful lives of assets is based on historic performance as well as expectations about future use and therefore requires estimates and assumptions to be applied by management. The actual lives of these assets can vary depending on a variety of factors, including technological innovation, product life cycles and maintenance programmes.
Judgement is applied by management when determining the residual values for tangible fixed assets. When determining the residual value management aim to assess the amount that the group would currently obtain for disposal of the asset, if it were already of the condition expected at the end of its useful economic life. Where possible this is done with reference to external market prices. The carrying amount of group tangible fixed assets at the reporting end date was £544,368 (2023 - £623,267).
The group establishes a provision for debtors that are estimated not to be recoverable. When assessing recoverability the directors consider factors such as the ageing of the debtors and past experience of recoverability. The directors have determined that no such provision is considered necessary as at year end.
The group holds it's investment in PRL Investor Limited ("PRL") at fair value as required under section 12 of FRS 102.
Judgement has been applied when determining the fair value of the investment, which has been based on the present value of expected future cash flows. This involves the estimation of the discount rate to be used, as well as the estimation of expected future distributions from PRL, based on both historical and expected future cash inflows. The valuation was initially provided by PRL based upon independent advice, and since been amended to reflect an update to the License, Services and Commercial Rights Agreement ("LSCRA") which has increased the proportion of overall PRL revenue distributions.
The carrying amount of the investment in PRL Investor Ltd at the reporting end date was £17,551,655 (2023 - £17,551,655).
Debt instruments are carried at amortised cost which, for certain long term creditors, requires the directors to estimate a market rate of interest. Variations in the estimate could result in change to value of liability recognised in the financial statements. The estimate of this rate is based on numerous factors such as current market conditions.
At the reporting end date the discounted 'other loans' have a carrying value of £21,080,927 (2023 - £20,976,687).
An analysis of the group's turnover is as follows:
Turnover has arisen wholly within the UK.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual (credit)/charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Unlisted investment
The group's unlisted investments include an investment in PRL Investor Limited ("PRL"). In line with other shareholding clubs, the group has valued it's investment in PRL based on the income stream that the investment provides.
Basis of valuation
The valuation is based on the discounted value of expected future distributions, assuming a discount rate of 8%. This valuation methodology has been approved by the PRL board. During the year there was an update to the License, Services and Commercial Rights Agreement ("LSCRA") which has increased the proportion of overall PRL revenue distributions. The original valuation was based on a distribution allocation rate of 33.33%. This has been increased to 50%, in line with updated LSCRA. The valuation has been amended to reflect this change. The directors consider this to represent fair value at year end.
Details of the company's subsidiaries at 30 June 2024 are as follows:
Obligations under finance leases are secured upon the assets to which they relate.
Obligations under finance leases are secured upon the assets to which they relate.
Included within other loans is amount due to The Department for Digital, Culture, Media and Sport ("DCMS"). The loan is repayable over 20 years with no capital repayments due for 2 years. Interest is charged at a rate linked to the Bank of England base rate. The loan is secured by a fixed and floating charge over the assets of the company.
See note 23 for further information on other loans.
Finance lease payments represent rentals payable by the company or group for certain items of tangible fixed assets. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The company has one class of ordinary shares which carry no right to fixed income.
Non-distributable profits relate to fair value gains on financial instruments.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
Included within other loans at the year end, a majority shareholder and director of the Group had a loan account with an outstanding balance of £20,471,213 (2023 - £20,366,893). There are no set terms of repayment of the loan.
Included within other loans at the year end, is a loan from a shareholder and director of the Group which is secured by way of a debenture arrangement ranking behind the Sport England loan. The outstanding balance at the year end was £609,714 (2023 - £609,794). The balance is repayable in monthly instalments over 10 years with no fixed terms as to interest on the loan.