Reading Charlie Methven’s intriguing interview with Roker Report yesterday, it’s clear to see that despite a fantastic start to the season in terms of results on the pitch, the club’s hierarchy have a tricky battle behind the scenes if they are to find the financial sustainability that this club so desperately needs.
That’s not meant to be a particularly despondent statement; it’s just that when you consider the absolute mess that was inherited from the previous regime, then you can appreciate how difficult it is not only to balance the books, but also to instill a new culture that replaces the wanton levels of waste that very nearly plunged our club into administration this past summer.
Methven labelled that excessive spending in order to satisfy short-term gains as a, ‘money-pit approach.’ A term he went onto define as:
Basically, spending money it [SAFC] didn’t have, and would never have, in an attempt to achieve short-term success, without a coherent strategy, thereby losing unsustainable amounts in the process and starting a culture of wastage.
As Sunderland grow under the guidance of Stewart Donald and his backroom staff, the club needs to learn from past mistakes. Financially, the club simply must do better.
Methven stated in his interview that the club was paying, “£8.5 million a year on interest payments, and the operating loss was widening all the time.” And as terrifying as that figure is, the fact the club was running losses of around £35 million per year whilst sitting in over £160 million of debt is unforgivable.
Of course, many fans know this already; after all, this very topic was discussed for months and perhaps even years as fans sensed doom lingering malevolently on the horizon.
As Methven put it:
In summary, by April 2018 the club was at death’s door but was saved, just as the undertakers were being summoned, on the whim of a wealthy man. That situation must never again be allowed to develop.
But despite the fact that Ellis Short cleared the debts, there are still issues that remain.
Removing the hundreds of millions of pounds of debt was clearly the first step in the right direction; however, to label the situation existing beyond that as a ‘clean slate’ would be a mistake. Methven labelled the club a ‘distressed asset’ even in spite of Ellis Short agreeing to pay off Sunderland’s debts - an ironic turn of phrase often quipped when analysing Short’s path to profit outside of his Wearside nightmare.
On paper, though, that’s exactly what we are.
Despite getting rid of the pool of blood in which we were lying, we hadn’t found a way to stem the bleeding that was constantly adding to the already gruesome situation. Donald and Methven had to find a way to reduce the club’s costbase down to £20 million in order to set the club back on the right path - an endeavour Charlie labelled as ‘colossal’.
Selling players helped, and the upsetting act of reducing staff numbers and general expenditure helped to reduce our outgoings, but increasing revenue is something that the club is keen to pursue, and that positive approach deserves some acknowledgement.
Austerity is a dirty word, I’m sure you’ll agree. Whilst cutting costs might be somewhat necessary, the ability to generate income is just as important - something many people fail to register. Thankfully, Sunderland are focusing on increasing their income with marketing and sales initiatives that have generated £2.5 million this season alone.
But, difficult and perhaps even unpopular decisions will need to be made moving forward.
By the time you get to June next year, the annualised operating loss for the following twelve months should be around £4 million, and that does not include cup runs and player sales - a televised third round FA cup tie at the Stadium of Light could bring in an extra £400,000 and a run to the Checkatrade final could make us close to £1 million.
The club’s chosen plan toward financial consistency looks to be moving in the right direction - especially when you consider £2.5 million of the aforementioned losses stem from an academy that on average brings in £6 million per year (as per the last ten years of money earned from selling young talent).
That puts Sunderland close to breaking even in the near future.
But difficult choices will still need to be made. Take for example the triumvirate of Bryan Oviedo, Lee Cattermole, and Aiden McGeady. A conservative estimate would put their combined wages at around £100k per week, or £5.2 million per year - a huge sum of money for our club right now.
Yes, all three are very good players, but this is where difficult questions are raised and where difficult decisions must be made. If, for argument’s sake, all three players received bids this window, would the club be foolish to allow them to leave? Or, would selling them and removing their wages be an offer that simply couldn’t be refused?
Obviously, Jack Ross would need to be happy that his squad would be unaffected by said players’ absence, or that his scouting network had cost-effective reinforcements ready to arrive. But, would fans be happy with that situation?
It’s an interesting scenario that deserves some thought. Realistically, however, it’s a situation we will need to get used to - moving forward the club will sell its best players at the right opportunity in order to finance future signings, and to help keep the club growing both on and off the pitch.
Throwing money around got us in this mess, bringing money into our coffers gets us out of it.
As Charlie argued in his interview:
By being stable and sustainable the club can make grounded, logical and strategical decisions rather than lurching from one panicky crisis to another. This is our short-term aim: to get the club into the right state as swiftly as possible.
It’s a strategy we should understand ahead of time, and accept its vital importance in growing our club once more.