Red & White but not in the Black — a deep dive into Sunderland's finances
03/21/2025 02:00 AM
Having run his eye over the latest set of accounts posted by Sunderland AFC, Gary Winter offers some perspective on what it all means and whether fans should be happy, or worried.
Sunderland AFC's revenue is up by 7% from last year — we made a solid profit on player disposals, and three times more money was spent on improvements to the Club's facilities and infrastructure.
The financial statements for Sunderland AFC Football Club were filed over a week ago for the year ended 31 July 2024 and, after having a read through, I found myself feeling just okay and, shamefully, a little ungrateful.
All aspects of turnover increased compared to last year - gate receipts (8.5%), television and media (3.5%), sponsorship and royalties (48%), conferences, banqueting and catering (3.5%), retail and merchandising (10%). A positive sign that we are moving in the right direction, but all very modest rises in monetary value.
There were increases in numbers of employees, yet wages and salaries appear to be firmly under control, with £82 of every £100 of revenue generated spent on staff costs, despite these costs rising by 22%. It's not clear where the sackings of Tony Mowbray and Michael Beale have been posted, so it is possible this may explain some of the increase compared to last year.
Operating costs were up by 17%, which appears a sign of the times where things are just more expensive. This increase of £7m was offset by player sales of £8.8m, which can be largely attributed to the transfer of Ross Stewart to Southampton. Most of this transfer fee appears to have been received up front, given there is only £350k in relation to transfer fees receivable from other football clubs within trade debtors at the year end. The only other notable point from the profit and loss account was interest payable of £626k on an £8.2m bank overdraft facility, which the Club confirmed had 'subsequently been cleared... after securing a working capital facility from an entity associated with the Louis-Dreyfus family.'
Overall, a loss before tax of £8.6m to add to the £8.9m loss of the previous year. Should we be worried? The answer is, not particularly in an industry where clubs generally lose a lot of money, and far greater sums than £8m, as we are only too aware.
In terms of the balance sheet, the Club received another £1.8m from shareholders taking the total to £19.8m since KLD acquired control of the Club. It states that these funds will be converted to equity in due course, although it is not the first time this note has been included in the accounts.
In all likelihood it's not anything worth speculating about or to concern ourselves with for now - clubs tend to owe money to owners without the day ever arriving to pay it back. As for KLD's personal finances and tax strategy, we aren't privy to that information but there are various reasons why a loan is more beneficial to him over equity at this stage, flexibility being one. Note that interest is not being charged on this to the Club either.
In summary, it all reads nicely and everything looks pretty stable. But none of this of course is at all exciting to a fan. Given the context of our recent history, we can certainly have an appreciation for the prudent work done by KLD and the team, and for the position we now find ourselves in.
Don't get me wrong, I am fully supportive of the Club's youth-orientated approach, but that doesn't stop me from craving more now that we have established this base core. And as a finance professional, I admire prudence - slow and steady can indeed win the race (and it's not even been that slow when you think about it - we will get our second chance in three seasons to win promotion via the playoffs come May). It feels like we've accomplished a degree of stability which, given where we were a few years back, is no mean feat. The historic mess has been cleaned up and foundations have been laid.
KLD has upgraded facilities - safe standing areas have been implemented, digital ticketing was introduced, a state of the art playing surface has been installed with under-soil heating, add to this a Bose PA system and modernised floodlights. However, football is not just a business, it comes with far greater emotional ties. I'm certain I won't be the only one out there who now wants to push down on the accelerator with more force.
The challenge now will be, can we get to the next level with these marginal financial gains and this slow and steady approach? Of course, we can - it took Brighton six seasons to win promotion from the Championship to the Premier League and it took Brentford seven. Playoff heartache was common in both cases, so we must be prepared.
Straight line trajectory is not the norm and volatility can be expected. And patience is not a virtue in this day and age and noise can be loud. We're all naturally greedy as football supporters, particularly when it comes to spending an owner's money that we don't benefit personally from if left unspent. That said, I have no desire to return to the Ellis Short days, but it feels like we are nearing a time where the model could do with a tier up into exploring a higher quality pool of players to accelerate our ascendancy, whilst simultaneously continuing with the tried and trusted, low risk/high reward, young and hungry additions. My gut tells me that perhaps the acceleration in outgoing transfer fees only starts with the sale of one or two of our current squad for £20-25m a piece.
What I would say, something that won't show up directly in the accounts, is just what a great job has been done by the player recruitment team to date. Whilst the financial statements will show that we have profited sizeably from the transfers of Ross Stewart and Jack Clarke (the latter of which will be captured in next year's accounts), we have yet to crystallise any profits on numerous other players. No supporter wants to sell their best players, but the market value of the squad has significantly increased and continues to do so, where many of our team could be sold for far more than we paid should the situation arise.
Investing effectively in young talent has given us a very strong footing to build upon. During the season, we had an average matchday squad age of 22.8 years old and fielded the youngest team in the Club's history. KLD and Kristian Speakman certainly have a vision and are committed to it, pairing it with the appointment of Regis Le Bris as Head Coach at the end of the financial year, who is described as a coach 'well known in France for the development of young players'.
What is abundantly clear from the accounts is just how difficult it is to make money in the Championship, outside of selling your best players. Teams relegated from the Premier League are entering the Championship with parachute payments that alone are greater than our total revenue for the year. We have a large and loyal fan base, where we can boast the highest average attendance in the Championship (9th in England), which is remarkable in a season where we had three different people in charge of the team, capitulated after Christmas, finished a lowly 16th, all after an exhilarating run to the playoffs in the prior season following promotion from League One. A partnership was struck with Hummel and Fanatics in the reported year and those same fans will have boosted next year's financials by purchasing two or three shirts and countless items of training wear. With all that in mind and even after the sale of Jack Clarke, next year we are in all likeliness staring at a very similar financial outcome as the past two seasons if business continues in the same vein.
The only way we are realistically going to recognise a profit, at the 19th year of asking, is if we sell a top player before 31st July, or we win promotion to the Premier League. The former won't be well-received but, judging by the past, the show will go on. However, the latter is night and day in terms of the financial rewards that come attached and will elevate the Club to a new platform in respect of being able to compete for years to come. Interesting times lay ahead, but for the time being we are in a far better place than when KLD first walked in the door, and for that we should indeed be grateful.
