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Sunderland AFC’s 2020/21 accounts explained

RR’s resident number-cruncher Dave Holloway gives his opinion on the recent set of accounts submitted by Sunderland AFC to Companies House.

Photo by Mark Fletcher/MI News/NurPhoto via Getty Images

It is nine months since the end of July so, it is the time of year when football clubs publish their audited accounts. Sunderland AFC published theirs on Friday, just before the statutory filing deadline.

What do they tell us that we didn’t already know? Well, not a lot really.

The football club’s financial performance - which is set out in its profit and loss account - reported a deficit of £11.7 million. As is ever thus, this football club’s financial performance was an absolute disaster, although COVID played a huge part in suffering such a deficit.

Turning to the financial position - this compares a company’s assets to its liabilities and is set out in the balance sheet - the accounts show that we had pitifully few assets and lots of liabilities.

The club's biggest assets were its land and buildings at a book value of £11million - the ageing and costly to run Stadium of Light. Fixtures and fittings, reflecting their age, were written down to £80k. We only need to look around the place to realise that the club’s biggest asset needs investment – investment which will run well into seven figures for it to return to somewhere close to the standard that it once was.

That asset, therefore, brings huge costs and future liabilities.

Sunderland v Fleetwood Town - Sky Bet League One Photo by Mark Fletcher/MI News/NurPhoto via Getty Images

It is also quite a sobering thought that the value of players' contracts was written down to a mere £1.158 million. This is not meant to reflect the re-sale value of the squad but the cost of their contracts (transfer fees) written down over the length of that contract. This perfectly demonstrates the understandable lack of incoming transfer activity - where fees have been paid - in recent years, this reflects our League One status.

Further down the balance sheet - the important bit - we report net current liabilities of £19million. This gives an indication of what the shortfall in available cash is – an overdraft in effect.

The message from this being that the owners or other third parties will need to continue to fund the day-to-day activities of the football club for it to be able to continue to operate. This has been alluded to in recent press statements, with figures of £8million of funding being provided by the ownership group mentioned. These figures were questioned at the time but I expect that is the absolute minimum that has been required.

The above is very simple analysis and is really what we already know – these accounts do not reveal any surprises. The club has been a financial basket case for as long as I can remember - probably since 2001, and certainly in the latter Murray years, through all versions of Drumaville, Short and Madrox. For most of that time we have spent way above our income, failed on the field, and have suffered from poor recruitment and overall disastrous on and off field management.

Even in the so-called good times of the early 00’s we overspent and underperformed - albeit with the backing of Short and with the benefit of Premier League money. We are where we are now as a result of 20 years of mismanagement. This club has operated as the ultimate shit show for years.

Sunderland v Derby County - Sky Bet Championship Photo by Ian Horrocks/Sunderland AFC via Getty Images

This period of accounts also reflects the period when the stadium was closed due to COVID and the club continued to transition from its Premier League status to League One. It is true that COVID and the lack of matchday revenue created the majority of these years' loss but over the last few years, revenues have gone down as have costs – but it is inevitable that costs reduce much more slowly than revenues with the result being that cash is drained from the club. That transition lasted years and is probably still being felt in many aspects of the club.

However, these accounts do not reflect what is happening now. They are no more than a historical document setting out the financial performance and position of the club at the end of the COVID period which was on the back of years of on field failure – for those reasons we shouldn’t get too hung up on them.

The changes that the new owners have made and how the club is being financed now aren’t reflected although there are some hints – such as the note that shareholder debt will be converted into shares. Which shareholders that refers to isn’t disclosed - we can only speculate on that and what it means for future shareholding ratios.

It is likely that the next set of accounts – which we won’t see until this time next year - will likely continue to make grim reading. This next set will, however, be the first set of accounts that report a full year under the new ownership/direction, and they will be free of COVID impacts. These will give us an idea of the investment made and how the new financing arrangements are working. We must however expect further losses to be reported despite the magnificent 30,000 plus crowds.

Sunderland v Lincoln City - Sky Bet League One Play-off Semi Final 2nd Leg Photo by Stu Forster/Getty Images

The fact is that this club can’t be successful financially in League One and will find it difficult to be successful financially in the Championship. It will only find success by selling players at significant profits and reinvesting that in hopefully better ones.

That is part of the strategy - this summer will be interesting to see how they deal with that, we should not be surprised if some of our brighter players are traded to help plug the gaps.

The club is now financed by its fans, us, but it can’t exist without the continued support and financial investment of its owners. If there are 30,000 of us then that is around £12million per year through the gate. To put that into perspective the wage bill in 2020/21 was £13million. A competitive Championship wage bill will need to be higher than that.

I would expect that we will have reduced the wage bill since July 2021 as the average age of the squad has been reduced, but our money will barely cover wages, not to mention transfer fees - another sobering thought. How can we ever dream of a return to the Premier League when faced with such challenges?

Therefore, the message from these accounts is that it remains a hell of a long way back, no matter who owns the club and how much they “invest”. We can only get back by good management and recruitment and from the continued magnificence of the fanbase - plus a hell of a lot of good luck along the way.

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