NEWCASTLE UNITED’S managing director Lee Charnley has explained how risks were taken last summer in a bid to ensure Rafael Benitez had the squad capable of achieving an immediate return to the Premier League.

Charnley has issued the statement after reflecting on the latest set of accounts for the year ending June 30, 2016, due to be published in full within a week.

For now Newcastle have released some headline figures highlighting what is to come and they show they have made a profit for the sixth successive year.

But there was a considerable drop this time around after substantial investment in the squad during that period saw the profit after tax drop from £32.5m the previous year to £4.6m.

The results suggest there will be a loss when the next set are released in a year’s time, when the cost of relegation to the Premier League will be highlighted.

It goes some way to explaining why the boardroom was reluctant to sanction Benitez further spending in January, when he felt a £30m profit in transfer activity last summer should have helped bring in the likes of Andros Townsend.

Charnley said: “Our approach, following relegation, was to make further sizeable investment in our playing squad in preparation for the EFL Championship season ahead and our annual wage bill is, we believe, still above and beyond many current Premier League teams. “Whilst not without financial risks, this strategy was adopted in order to maximise our chances of promotion at the first time of asking.

“Outgoing transfers will ultimately generate a significant net player trading surplus for the summer 2016 transfer window but, due to the cash profile of the deals, this will result in a net cash outlay in 2016-17.

“Our adopted strategy has therefore only been made possible by the cash injection from our owner, who continues to provide interest free funding to support the club’s operations, never more important than during this financially challenging season.”

The Northern Echo: St James' Park. Action Images

Victory over Burton on Wednesday night lifted Newcastle back to the top of the Championship by a point; they are also ten ahead of third placed Huddersfield with six matches remaining.

Benitez’s men are on track to seal an immediate return to the top-flight and the accounts highlight the importance of delivering promotion at the first attempt.

Bearing in mind the latest figures are from the final season in the Premier League, there will be a substantial drop when the next set are released because of the drop in TV revenue alone.

During 2015-16 turnover fell by three per cent, the most significant element of this being a £4.5m drop in media income, down from £77.2m to £72.7m. Operating expenses increased seven per cent to £96.5m and amortisation of players’ registrations increased by £7.8m to £28.3m. This reflects the additions to the playing squad during that period when the Georginio Wijnaldum, Aleksandar Mitrovic, Florian Thauvin, Chancel Mbemba, Jonjo Shelvey, Andros Townsend and Henri Saivet were all signed.

The total net cash spend on players in the financial year to June 2016 was £70.7m, compared to £23.8m in 2015. Wages to turnover ratio increased to 59.4 per cent from 50.1 per cent.

The club’s owner Mike Ashley continues to be owed £129m from the club and that continues to be interest-free.

Charnley said: “The 2015-16 season was extremely disappointing for everyone connected with the club. Significant sums of money were spent to strengthen the playing squad in the summer 2015 and January 2016 windows, which also resulted in an increase in our annual wage bill.

“In the context of this spend, relegation was both unacceptable and totally unexpected. The financial impact of relegation is difficult to overstate and this will become evident in our next set of financial results for the year ending June 2017. “The biggest impact by far is the dramatic reduction in centrally distributed income that comes with dropping down a division; the reality being our income in this area is forecast to fall by over £30m compared to 2015-16.

“ To highlight the differences, our 16 live TV games last season earned us £12m in revenue. Contrast this with 2016-17 EFL live fees which based on our current number of confirmed appearances (12 away and 6 home), will earn us a total of £720,000. “To illustrate further the cost of relegation, 2016-17 marks year one of the new Premier League TV deal and the team that finishes in 18th place this season is expected to receive in the region of £30m more revenue than we did for the same place finish last year.”

Wednesday night’s referee Keith Stroud, meanwhile, has been taken off his fixture this weekend. He was due to take charge of the Millwall game with Gillingham.

Stroud has now been removed after his gaffe at St James’ Park, where he apologised after the game for not applying the laws of the game correctly.

He awarded Burton an indirect free-kick instead of ordering a penalty retake when Dwight Gayle encroached into the area when Matt Ritchie converted the spot-kick.