This feels strange… I’ve got an article on Sunderland accounts to write and, well, they’re not bad. I’ve not spent days shaking my head and being generally disgusted at the preparation and content of them. I’ve not tried to work out where the money that we knew had come in had gone. And, if you don’t want to read any more than absolutely necessary, here’s your conclusion – we’re doing ok.
The accounts are for the year ended July 2022 so cover the final (ever?) League One season, the little manager I didn’t like who went to Scotland had just been replaced by the little Scottish manager we liked but now don’t, we’d won the play offs, we wondered if the players could step up to the Championship… Weirdly, they also include the Coventry game at the start of the season because of the whole world cup shenanigans and the season starting in July.
I only remind you of all that because many will have read the summaries of the accounts and assumed promotion had got the accounts to where they are. But no, increased revenues are in League One, salary and general cost management were achieved in a season where we got battered by Bolton. We made a loss, obviously, but a far smaller loss than previously - we actually made far bigger losses in the Premier League. And pretty much every club in League One made a loss, hence the need to get out of there – which we did. So, let’s not look backwards but rather look forwards.
The accounts confirm there is no external debt. We don’t owe anyone money apart from the shareholders (the accounts confirm that the number of shareholders has fallen exactly as we had been told last year).
I would still like to see a statement in the accounts that the shareholders and the directors guarantee that debts will never be secured against any of the assets of the club again as we are seeing too many clubs where this causes friction between the fan base and the club and threatens the long term existence of those clubs.
Interestingly, one of the ‘fundamental risks’ declared in the accounts is that fans may lose their incredible commitment to the club. This isn’t the club saying they think it is happening or that it’s an immediate concern but it’s interesting that they have publicly declared the importance of their amazing customers in making the whole thing work.
The accounts show there was an error in the valuation of the Stadium in last year’s accounts. This is purely an accounting error and really not a big deal (especially as it has now been corrected) but it does show that the stadium’s value is falling (as you’d expect).
If I was looking at the accounts as an investor, as KLD and team must, I’d be looking at the maintenance of the stadium and wondering if the balance between cost savings and asset value was slightly wrong. Time to tidy up the concourses and facilities? Match day revenues are improved in these accounts but the vast majority of that is to do with hospitality and corporate. If I was on the board, I’d be asking what it would cost to enhance the facilities in the bowl and in hospitality and what increased revenues could that help generate. Speculate to accumulate. Make those core customers happy and in the process protect the assets and maybe help impress potential sponsors – another area where (understandably in League One) we aren’t where we need to be.
The club will point to the fact we are a long way ahead of any other club in terms of match day revenues. This is true but, we have 40,000 people to sell to, Accrington have 2,000. Was our income 20x that of Accrington? Or double that of Ipswich? No. So work still to be done if we look at per head spending.
The non-football side of the club has improved massively over the last two to three years and, perhaps, we should sit back and be grateful for that. But, in the same way as we need to move forwards on the pitch, we need to keep moving off it. And the accounts show one obvious area where improvement is needed – retail. The post covid period has hit all retailers and selling kit, tracksuits and polo shirts is far from easy (especially with excellent alternatives available five days a week at A Love Supreme). But it’s an area the club need to work on. Can the club find ways to maximise sales elsewhere in the world? Are they now getting shop hours right? Are they selling the right products at the right prices? Again, the only weak area of the income side of the accounts lies in retail and sponsorship. As a director, I’d be asking these questions as we continue to try to push forwards in all areas. Celebrating one area of off field success and ignoring others is idiotic. It’d be like signing a collection of amazing midfielders and failing to sign a single striker.
The dramatic increase in revenues makes the player wages as a percentage of revenues look amazing falling to the 30s% from the high 60s% but in fact the cost itself has not actually changed a huge amount. We will know in a year if players had promotion wage increases in their contracts, you’d hope so if their agents are up to scratch! Far be it from me to suggest we’ve failed to sign the right players for the Championship season we’re just finishing but, again, wage management is great if we have the right players in the set up. These accounts suggest an extra striker would not have broken the bank, but that’s a conversation for a different article. Credit should go to the set up that has produced players which increase in value at a relatively low salary outlay.
It should also be observed that these accounts show that we don’t NEED to be a selling club, it is unquestionably part of the business strategy that we might want to be a selling club when the prices are right but we’re not in a sell quick at any price situation, far from it. It’ll be interesting to see how the squad changes over the summer and how that side of the business plan works in practice.
As I said at the start, the conclusions are that the tanker has been turned round. There’s a business plan in place and a management process that is clearly fit for purpose as it’s working. There is a long way to go yet and, we certainly can’t risk any backwards steps on the pitch or off it as there are no stores of money lying around (like in any club) but, for once, it’s nice not to see red flags in a set of football club accounts. Onwards and upwards with lots more hard work.