Charlie Methven, in an chat with FC Business magazine, has spoken in depth about the bleak financial situation that he and Stewart Donald inherited when they purchased the club from Ellis Short - and he insists that the sole focus going forward for our new owners is to get the club back where it belongs whilst being mindful of not repeating mistakes made by the previous regime.
In the interview, which was released earlier this week, the co-owner of Sunderland AFC gave a frank and honest assessment of Sunderland’s financial picture.
When asked about how the deal came about, Methven admitted that the parachute payments which the club receive following our relegation from the Premier League in 2017 will go towards paying off outstanding debts - and whatever is left will go towards purchasing new players in the future:
The club is free of debt to Ellis Short (the club’s former American owner) and the banks, but there are major outstanding trade liabilities – probably around £30 million net. We agreed to pay Ellis £15 million upfront this summer, with a further £25 million spread over the next year or so. We do have the parachute payments, which total £45 million or so, I believe. The majority of those will be taken up dealing with the outstanding liabilities, leaving – we hope – a nice little ‘pot’ at the end to help us drive up the playing budget for a few seasons while we grow the club’s overall revenues.
He also spoke with honesty about the morale around the club when they first walked through the door, conceding that he “had come across such a broken business”:
It was terrible. Fear, delusion, denial, lack of direction, confusion. The lot.
Stewart and I had never come across such a broken business.
We performed very major surgery in the first few weeks, reducing the non-playing wage bill from £8.5 million to £5 million. The levels of over-staffing were horrendous. SAFC was employing almost twice as many people as Newcastle! There are some fantastic people at the club, but the cumulative failures of leadership over a protracted period have had a scarring effect that will take a while to heal fully.
He then went on to talk about what our business plan is going forward, and shockingly admitted that before they arrived, nobody at the club was employed to sell sponsorship deals - something which was evident in the fact that, until BETDAQ stepped in at a very late stage, Sunderland AFC had no official club sponsor lined up ahead of the new season:
The business plan is straightforward: increase revenues and reduce costs until we reach sustainability. It really is that simple.
When we took over, the club’s revenues minus the parachute payments were about £16 million a year, and the costs around £45 million, so an operating loss of £30 million. Because of the parachute payment of £34 million, they reckoned that made the club profitable, but it doesn’t, of course. Those payments are supposed to give you a bit of breathing space to restructure. They are not an ongoing part of the club’s revenue base.
We went on a major marketing plan aimed at driving up season tickets. These had been projected at 17,500, but we have now sold 22,000. We have already brought in a number of new sponsors.
SAFC had hardly bothered with this. Despite recent hundreds of people doing all sorts of things elsewhere when we arrived there was not a single person in the entire business whose job was to sell sponsorship!! No commercial director; no head of sponsorship sales… nothing. We appointed Tony Davison from Tottenham Hotspur, and by the time the season starts Tony will already have more than paid his own salary with new deals.
Overall, we are currently projecting revenues of £18.5 million this year. Next year, with a better ‘run-up’ at the new season we would want to see that rise to £20 million. Meanwhile, we are intent on reducing costs to circa £22 million or maybe £23 million. That would see the club lose £5 million this year and maybe £3 million next year. That is a manageable sum, and if the Category 1 Academy is functioning as it has done, and should continue to do, the funding gap will be met when the odd player gets sold, as Jordan Henderson and Pickford were in the past. If for whatever reason that doesn’t happen it is a level of loss Stewart and Juan can afford to bear.
He also gave a warning to the supporters that want the club to spend their way out of the situation we find ourselves in - reestablishing that throwing money at our problems is what got us into trouble in the first place:
For me, that is a sustainable achievable model which would still give SAFC easily the largest wage budget in League 1. If we were fortunate enough to get promoted then revenues in the Championship would increase by circa £10 million - £5 million extra TV revenue, £2 million extra ticketing and corporate hospitality and £3 million extra in uplifts that have been built into our commercial deals. That would make SAFC’s wage budget in the Championship firmly in the top 10, which is as it should be. But if we stayed in League 1, the club would still be stable and sustainable.
We aren’t just ‘owners’ – we are custodians of an institution. Risking the future of that institution on some insane gamble on short-term success is irresponsible, and Stewart, Juan and I aren’t going to do it.
What is ironic is that despite the club having almost collapsed under debts which meant Ellis was advised to put it into administration there are still Sunderland fans who want us to repeat the mistakes of the past. It’s as if they cannot comprehend a club living within its means; as if to do so is somehow a bit lower-class. But look at Burnley; look at quality clubs like Southampton. Both are smaller than SAFC in terms of natural revenues, but both have been far more successful on the pitch whilst adhering to sustainable models. A healthy organisation is not one that is living one step ahead of the administrators.
There are quite a few people at the club who still need reminding that we are now in the lower leagues. But for Stewart and me this is no great shock because it’s where our hometown club, Oxford United, has been for almost 20 years. League 1 is a cracking league. As Manchester City found out at Wigan last year, a strong League 1 side can be a formidable outfit!
In terms of what it will cost to regain former glories, the first thing to talk about is humility. We will not get promoted by walking about as the Billy Big Balls of the lower leagues. We need to front up, relish the challenge, roll our sleeves up and compete.
The full interview - in which Methven also talks about how they recruited Jack Ross, what made the new owners want to buy Sunderland, the sheer level of player overhaul at the club and our targets for the season - can be found here.
Be sure to check it out - it really is an excellent and insightful read.