Sunderland closing the wages gap

Sunderland chairman Niall Quinn with owner Ellis Short and Chief Executive Steve Walton applaud the players onto the pitch before the start of the game against Manchester United.
Sunderland chairman Niall Quinn with owner Ellis Short and Chief Executive Steve Walton applaud the players onto the pitch before the start of the game against Manchester United.
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SUNDERLAND AFC are on course to bring their wage bill in line with income, says the man in charge of balancing the books at the Stadium of Light.

Sunderland have been criticised for shelling out more than four of every five pounds earned in wages – but chief executive Steve Walton says that is set to change next year, despite the wage bill rising even further.

“The majority of the numbers are more or less cast in stone. We will be turning over more money this year because the TV deal was better and we’ve been doing well on the pitch,” he said.

“Our wages have gone up again, but crucially the percentage of wages to turnover will decrease. We’ve received some criticism for the figure being above 80 per cent – that certainly won’t be the case this time.”

The latest figures show the club made an operating loss of £5million in the 12 months up to the end of last July, rising to £25.5million with the inclusion of transfer activity, up £2million on the 2009 figure.

Steve Walton is also predicting the club will move closer to balancing the books this financial year.

“We are going to see a journey where we’ve peaked in terms of the losses and are going forward reducing that loss each year,” he said.

“I’m not going to say we’re not going to make a loss this year, because that’s not practical in terms of where we are and our development. Times are tough out there. It’s important to keep the business in good health and income streams like this summer’s pop concerts will help us.”

The support of owner Ellis Short – who has converted another £19million in loans into shares in the club – had allowed the Black Cats to back manager Steve Bruce in the transfer market.

“The headline figures reflect the investment we’ve made in the squad over the last few years,” said Mr Walton.

“Businesses don’t get into difficulties because they don’t make profits – they get into trouble because they run out of cash, which is a really important distinction that has to be made.

“We’ve been able to sustain this because we’ve been investing in the squad thanks to our owner investing in us, in terms of giving us the cash to support the purchase of players.

“We have a stable position in terms of our ownership and our key management people which are also important from a financial perspective.

“Our external term debt is now less than it’s been at any time since the takeover by the Drumaville Consortium and is coming down year-on-year.”

The headline loss figure was misleading because of the way transfer expenditure was accounted for, he added, with the practice of “amortisation”, meaning the cost of buying a player, was spread across the whole length of his contract, even if the whole transfer price was paid up front.

“When you look at the amount which is actually lost in the accounts, most of that is a result of amortisation of players,” said Mr Walton.

“There’s a big disconnect between cash and profit. The transfer fees of many of our players appear in the last published accounts even though we paid out the cash for them some years ago.

“It’s also important to remember when we buy players we are also buying assets. If we buy wisely, then there is a good chance that they will appreciate in value. This is particularly true with a young squad.

“If you look at the most recent accounts, the net book value of our players was just over £50million and that was before we spent nearly £20million on Gyan and Sessegnon. By most people’s reckoning, our current squad is worth substantially more than that.

“You could probably get something near that figure from two or three players, never mind the entire 25-man squad.”