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Sunderland’s Spiraling Costs Cause Struggles On Many Fronts

11:59 pm, Monday, March 17th, 2014 by Dr. Ed Harrison · 37 Comments

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.

s short

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. :D

Comments welcome.

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.



Tags: Financial Fair Play · Financials · Newcastle News · Other News



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37 responses so far ↓

  • 1 Big Pappa Cissé // Mar 18, 2014 at 12:06 AM

    Awwwwwww….. What a shame :) .

  • 2 Dingo†® // Mar 18, 2014 at 12:42 AM

    yeah i’m gutted for them…. at least they save money on not buying soap or bog roll

  • 3 Dingo†® // Mar 18, 2014 at 12:43 AM

    maybe if they start bin dipping a bit more than they do already?

  • 4 jimmysmith // Mar 18, 2014 at 2:23 AM

    Well that is the cold hard truth and ironically one of the few things in our favour as fans of Utd under Ashley. Get relegated and you’re f@cked. It’s probably the only thing that might make us be able to count on the owner. He’ll protect his asset and won’t let us drop. Barring incompetence of course, which unfortunately, still appears to be a factor.

  • 5 NEWEXPATMAGPIE // Mar 18, 2014 at 5:28 AM

    Idon,t Hate Scumberland ! but with their arrogance and attitude towards us, i should do !

    I rate them above QPR because of how Sloppy Chops poached Remy away from us at the last minute ! But that, i believe was partly our own fault for sending him yo London for his medical. It was also in London where his alleged Rape saga all begon?

    It may do Sunderland good to get relegated, as they can then rebuild under Poyet? But a min point would be no derbies for a year!

  • 6 Himanshu Dhingra // Mar 18, 2014 at 5:31 AM

    NEWEXPATMAGPIE

    Not Sure If I even want derbies.

    Have you looked at last 5

  • 7 Lilongwe Geordie // Mar 18, 2014 at 5:35 AM

    Interesting to see the FA Committee advising the FA Council to reject the application from Hull to change name to the Tigers. Would most likely signal the end of Red Bull’s interest in buying an already established top flight side, as they may be unable to change the name.

    One more potential buyer off the market…

  • 8 Himanshu Dhingra // Mar 18, 2014 at 6:11 AM

    offering cheap season tickets is a clear indication that no money will be invested or if there will be any SALE.

    If there was going to be any Signings fans/supporters would not have minded paying slightly more at the Turnstiles.

    Same old Crap it will be.

    I have had enough

  • 9 Lilongwe Geordie // Mar 18, 2014 at 6:21 AM

    HD,
    I disagree that lower season ticket costs are an indication we won’t invest. We might not, but I think he will have to bring in a few players so I expect some investment, even if not huge amounts. Whether we do invest, or don’t my opinion is that it isn’t linked to the price changes.

    I’d say the lowering of prices is more an indication of the club becoming worried that more and more people are becoming despondent at the direction the club don’t seem to be moving in, and the lower prices is to entice people to keep turning up.

  • 10 Himanshu Dhingra // Mar 18, 2014 at 6:29 AM

    LILO

    U saying the direction isn’t linked with quality players coming in?

  • 11 Lilongwe Geordie // Mar 18, 2014 at 6:31 AM

    Hadn’t realised Rolando Aarons had been with the first team squad for the Fulham match. Not sure how close he is to the first team, but he bagged last night against Whitley, an out and out winger, could be worth giving him a bit of game time – would prefer Sammi to be given more games, but if not, wouldn’t mind 20 mins here and there to give the lad a chance. Can’t be any worse than that drab affair at Fulham.

  • 12 Himanshu Dhingra // Mar 18, 2014 at 6:33 AM

    We can’t beat teams like Fulham? couldn’t beat Derby in 07. Reading last year Wolves the year b4 that.

    Haven’t scored against sunderland, WBA Norwich, Swansea?

    What the hell is this a Circus.

    Yet Pardew is some sort of Messiah.

  • 13 Lilongwe Geordie // Mar 18, 2014 at 6:38 AM

    HD,
    I’m saying that that is the perception of fans that maybe we won’t sign any ‘quality’ players. But that doesn’t mean it won’t happen, and it doesn’t mean that the price decrease is linked to nobody coming in.

    There was a price drop the summer we signed Cabaye, Ba, Santon, so the two are not linked.

    The point of the price drop is to keep people coming through the gates, but it doesn’t mean we won’t sign players.

  • 14 Himanshu Dhingra // Mar 18, 2014 at 6:42 AM

    Lilo

    Fine.

    on a different but may be a similar note.

    Why can’t the club increase prices (I think we have the lowest) to be more competitive?

    There is a lot of scope.

    Wouldn’t the public pay to watch good/exciting players, managed by a decent manager and not Alan pardew?

  • 15 Himanshu Dhingra // Mar 18, 2014 at 6:44 AM

    Can we actually call Alan Pardew an experienced Manager?

    He hasn’t learned anything from his experiences!

  • 16 Blofal // Mar 18, 2014 at 6:55 AM

    Pardew like most managers is a manager who has a system and expects/requires his players to play to it. I don’t think he is better or worse than most premier league managers.

    The truly great managers are the ones who develop a system according to the strengths of the players they have… thus they appear to “make them play above and beyond”.

    Great managers are rare. Players like Tevez and Ben Arfa will always be average under Pardew and other average managers.

    Teams like Man City are the exception… where there is so much talent up front I’m sure Pellegrini (the f*****g old C**t) just tells them to do what they do best. The way those players constantly make runs into the box and rotate with each other is a pleasure to watch and really can’t be taught with a system or tactics. They players are just highly skilled and know each others games.

  • 17 Blofal // Mar 18, 2014 at 7:01 AM

    Pardew is neither better nor worse than your average premier league manager.

    Average managers develop a system and require their players to play to it. That is why players like Tevez and Ben Arfa will always be average under average managers.

    Great managers develop systems according to the strengths of the players they have. Thus they seem to make players play “above and beyond” what they are capable of.

    Great managers like Sir Bobby Robson are rare. I wouldn’t say there are any truly great managers around at the moment. Mourinho is entertaining… but not a genius.

    Gus Hiddink had a reputation for getting average teams to play above and beyond as shown with South Korea and Australia… but I think he has gone off the boil a bit in Russia.

  • 18 Pizzicato The Arizona Geordie // Mar 18, 2014 at 7:01 AM

    Now we know John Carver is not available of bringing in the young lads. We should be happy, right? Roland Aarons and Adam Armstrong should be able to shine for a little bit.

  • 19 Lilongwe Geordie // Mar 18, 2014 at 7:04 AM

    HD,
    Times are hard for a lot of people in the North East, many struggle to afford games anyway. I have no problem with lower ticket prices at all, in fact I think it is a positive.

    I think more emphasis should be placed on getting the commercial revenue increased, fully utilising all the advertising space for paying companies, improving commercial deals, marketing, merchandising, conference facilities, business facilities, etc. That is how the money that can increase competitiveness will be made, not an extra 25 quid or even 50quid a year from 20/30 thousand season ticket holders.

  • 20 firebug666 // Mar 18, 2014 at 7:24 AM

    I don’t like Alan Pardrew probably never will. He is an average manager at best. However if you put yourself in his shoes and look at this season, he has not done to badly.

    I am excluding his personal behaviour from this. We are 9th in the league with the possibility of finishing higher, he has managed a team where he has been given no permanent signings, and had our most influential player sold out from under him in mid season.
    Cabaye was not replaced, in fact apart from Luuk de Jong coming in on loan we have not strengthened our squad anywhere.

    He is a man working in a very public high profile and high pressure job, but is given very little to work with.

    We all sit at home in our armchairs and bleat on about what we would do, and how he should be doing things better, But there is no pressure on us, and the teams we would pick always look good on paper. The reality will be a lot different, when you have to get results.

    Pardrew is just and average manager, trying to punch above his weight, he has not done to bad given the way the club is being run around him.

    Like I say, I am not his biggest fan, but I do try to understand his circumstances.

  • 21 Jail for Ashley // Mar 18, 2014 at 7:33 AM

    Lilo,
    Although I sympathise with those that can’t afford games I don’t think all these deals and reductions are good for the long term future of the club, we were given a veiled threat the other week that our only way of competing with certain clubs was our gate receipts, a couple of signings each window wouldnt have thousands cancelling their tickets, that summer we signed Ba, Cabaye etc somebody was sold to make way constantly leaving us five players short not really sufficient investment.

  • 22 Transfer Sage // Mar 18, 2014 at 7:34 AM

    no matter what the reason lower ticket prices is good for fans, simple as that

  • 23 Transfer Sage // Mar 18, 2014 at 7:38 AM

    Ticket money is big still, but the club’s focus should be on maximising other revenue…german clubs do quite well and produce good footballers and can charge season ticket holders £200 a year at Munich, so it’s not vital ticket prices must be sky high.

    If the club maximised other revenue and genuinely developed the academy, coaches as well as buildings, things would be looking up for the long term.

  • 24 Jail for Ashley // Mar 18, 2014 at 7:38 AM

    Firebug.
    Well said, I wish more people would understand that when asking for Hiddink and Benitez.

  • 25 Jail for Ashley // Mar 18, 2014 at 7:41 AM

    Hull City owner Aslaf Alam has threatened to sell if he doesn’t get his own way over the name change, if only it was that easy…..

  • 26 firebug666 // Mar 18, 2014 at 7:50 AM

    Jail
    Thank you. Personally I don’t think any manager would fair any better under the current regime, maybe they would get us playing better football, but I don’t think we would be much higher than we are with our current crop of players. At least Pardrew is sticking with the club, when many other managers would have walked. I more than any would love to see the back of him, but I fear more what might happen to the club if Pards did leave, Ashley has a very poor track record when brining in staff.

    TS

    I agree, cheaper Tickets for the fans can only be a good thing, and very welcome. I just hope that it does not come back to bite us on the backside in the future, when the club tell us we cannot afford to compete with Fulham, Swansea and Southampton.

  • 27 toonarmydownsouth // Mar 18, 2014 at 7:53 AM

    Firebug
    Fully agree well said mate

    JFA
    Tbh i think a threat is all it is from Aslaf Alam no one will pay mega bucks for Hull and he’s pumped to much money in (not a loan!!!) to walk away

  • 28 Transfer Sage // Mar 18, 2014 at 7:56 AM

    firebug

    They already tell us we can’t compete financially with teams like Southampton, and we don’t spend much at all so I can’t imagine this will make things any worse.

    I’ve said a few times the spending isn’t my biggest issue, we have a team of relatively decent players, an average manager who does a reasonable job results wise (even if i don’t love the football we play) and we are fairly safe in the league, even buuying last year when we struggled, so Ashley clearly wants us to remain premier league.

    My only problem has been the communication and how we are lied to over certain issues or kept in the dark when there is no need for it. A club isn’t a normal business, a poor product will still get a lot of custom as people are fans not customers and Ashley knows that. I’d love this to change and a lot more honest engagement with fans.

  • 29 Transfer Sage // Mar 18, 2014 at 7:57 AM

    tads

    Exactly, he has a business in Hull City worth X amount, if he stopped investing in it and they fell down the league he would have a business worth a lot less, he’s hardly a man city owner who is putting 100′s of millions in…it’s a good level of investment but not crazy money where they would notice the drop.

  • 30 Jail for Ashley // Mar 18, 2014 at 8:01 AM

    Firebug,
    You mention the squad not being strengthened, looking at the outgoings since the five were signed last January you could argue that the squad has been weakened, as six first team players have been allowed to leave, not counting your Rangers and Xiscos, that’s all the good work of our benelovent owner undone in the name of profit.

  • 31 jesperfuglsang - captain of the lemon crew // Mar 18, 2014 at 8:01 AM

    TS…that is why I think we need a CEO or Chairman like Lewy! Someone to get a structure in place and see potential instead of limitations,

    …please God not another DoF – too many Cocks in the hen house!

  • 32 Slank // Mar 18, 2014 at 8:06 AM

    Firebug

    Generally, average clubs have average managers and Pardew is an average manager.

    Generally, top managers go to top clubs. We are not a top club and that is why we will not get a top manager.

  • 33 toonarmydownsouth // Mar 18, 2014 at 8:08 AM

    JFA
    The one sale i still don’t really get was Perch
    Given how injury prone out squad has been and lack of cover in areas like RB i just didn’t see the point of flogging a very good squad player for peanuts
    You can’t have a squad full of superstars you need players like Perch, doubt his wages were high either

  • 34 Jail for Ashley // Mar 18, 2014 at 8:08 AM

    tads,
    Would be great to hear Ashleys say, if you don’t like the stadium name change I’m selling harrumph… People would be out in droves to let him know

  • 35 firebug666 // Mar 18, 2014 at 8:10 AM

    TS

    Again I agree with what you are saying, I also hunger for the day the club speaks to the masses and gives us some hope for the future. This however will never happen, it seems that behind closed doors nondescript people in long coats, trilbies and dark glasses are surreptitiously working behind the scenes with not a lot of focus on football. Unless that is working out how to sell Pardrew more lies to feed to the gullible masses.

    Communication is essential for the fans (any fans) but we suffer more than most.

    I disagree on spending though. We need to spend desperately this year more so than when we were fighting relegation. Other clubs are starting to catch us and soon will be leaving us behind.

    Hate to say it nut the future is not bright for Newcastle.

  • 36 firebug666 // Mar 18, 2014 at 8:11 AM

    but*

  • 37 Ex-Pat Mag // Mar 18, 2014 at 2:48 PM

    Oh dear how sad, never mind. Could be worse though you could have Pardew as a manager.




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