The chickens seem to be coming home to roost at Sunderland, and not only are they struggling against relegation for the second season running, but the Black Cat’s finances are also not in good shape.
Ellis Short – owner of Sunderland
Sunderland are currently third bottom of the Premier League and three points behind both Crystal Palace and West Brom, but they also have three games in hand, so some wins would quickly see them climb the league table – but they have to start winning soon.
The transfer windows of the last few seasons hasn’t helped their finances and last summer they brought in 21 players at a cost of just under £30M gross, but they then sacked manager Paolo Di Canio in late September – and of course he was the man who wanted all those players brought in.
That’s what Newcastle used to do when we fired managers like Kenny Dalglish (1998), Ruud Gullit (1999) and Bobby Robson (2004) in the month of September, after new players had been brought in over the previous summer under the guidance of the manager – it’s just not a good way to run a club.
Sunderland have just announced their financial results for the year through last June 30th, and they had revenues of £72M, which is a drop of £6M from the previous year’s figure of £78M – a drop of 7.7%.
Newcastle’s revenues for the same period was £95.9M so Sunderland have about 75% of Newcastle’s revenues – but the Black Cats reported a loss of £23M compared to Newcastle’s profit of £9.9M.
Sunderland have an overdraft of £39M on which they pay interest, which seems to be a concern for owner Ellis Short, and that’s less than Newcastle’s, which is £129M but it’s interest free from owner Mike Ashley.
But it’s Sunderland’s spiraling costs which will need to be brought under control, and a relegation would not be good for the club, although they will get parachute payments from the Premier League over a number of years and they still have a good chance of avoiding relegation this season.
QPR are a side that spent big money (they didn’t have) last season to try to stave off relegation, but it didn’t work, and their financial status is very poor indeed and they lost £65.4M in the same period and have debts of £177.1M on reduced revenues of £60.6M.
Notice those figures are while QPR were still in the Premier League through the end of last June – so next year their revenues will plummet.
So Sunderland are in much better shape than QPR, that’s for sure, but they must get a handle on their costs before things get worse, and the club will have to hope they can stay in the Premier League this year as Ellis Short is well aware of:
“The directors consider the major risk of the business to be a significant period of absence from the Premier League. Ongoing investment in the playing squad aims to reduce this risk.”
“The directors consider the main market risk to the business to be the interest rates on the bank loan and the banking facilities.”
The Mirror is reporting that if Sunderland are relegated they would get a £26M parachute payment, but that would mean big losses from then on – as PL clubs will now get between £60M and £100M each May for the next three years, depending primarily on their league position – so the bottom club gets around £60M and the top side gets around £100M.
Newcastle’s revenues through June of 2010 were £52.4M after we were relegated, and they fell from £86.1M in the previous financial year, when we were still in the Premier League.
But PL clubs at that time were getting a lot less than they are getting now – and there are huge increased payments from TV – so the decrease in revenues is likely to be even steeper for a relegated side now.
Sunderland could survive the disaster of a relegation, but as Ellis Short hints above, they would need to get promoted back to the Premier League fairly quickly – like in their first season.
We think it best that both Sunderland and Newcastle are both in the Premier League – although after the last three results – we are starting to have second thoughts about that.
Note: Lewis Williams is in his final year at the University of West London (UWL) studying for a BSc (Hons) in Construction Management, and he is busy on his dissertation on Site Waste Management Plans and he has a survey he needs filled out.
This survey is for anyone who has been part of a construction project (past or present) that used some form of waste management on the project. See if you can help him with they survey here.