Sunderland AFC accounts: Transfer insight, significant debt developments and potential green shoots

Sunderland released their accounts for the 2023/24 season earlier this week, their second campaign back in the Championship.

Phil Smith has taken a closer look at what they reveal and here's his analysis of what it tells us....

PLAYER TRADING IS ESSENTIAL FOR SUNDERLAND

Sunderland's financial results, as well as those across the Championship, underline that running a second-tier club remains one of the quickest and easiest ways to lose money. Sunderland did a lot of things right in 2023/24, boosting their revenue (albeit modestly), keeping a relatively healthy wage-to-turnover ratio compared to many of their divisional rivals, and had a squad with plenty of homegrown talent.

Even so, they ran an underlying loss of £16 million - reduced to a more modest £8.1 million because of the sale of Ross Stewart to Southampton. That allowed Sunderland to post a player trading profit of just under £9 million, bolstered by the additional sales such as Lynden Gooch and Isaac Lihadji. Sunderland did of course spend on transfer fees in the period, with the accounts showing around £6.9 million in acquiring player registrations. Romaine Mundle, Nazariy Rusyn, Adil Aouchiche and Timothee Pembele were amongst the players signed across the two transfer windows this period covers.

Put simply, Sunderland are in a similar boat the vast majority of their divisional rivals in that the realities of trying to compete with clubs bolstered by parachute payments mean that costs are growing far faster than revenues. These accounts underline that as Sunderland grow their wage bill in a bid to win promotion to the Premier League, the occasional player sale is absolutely essential to avoid running up the kinds of losses that could lead to stagnation and even some potential issues with the division's profit and sustainability rules (at the moment, the Black Cats are well within those rules).

If Sunderland's loss of £8.1 seems significant, then consider that is actually the tenth best performance of the second-tier second-tier clubs to report their figures so far.

It should be noted that Sunderland's performance was also impacted by some external factors, including some capital spending on overdue improvements to the Stadium of Light and the decision to part company with two head coaches over the course of the season. For a club striving for sustainability, that is clearly far from ideal.

THE FINANCIAL GREEN SHOOTS - SUNDERLAND COULD POST A PROFIT THIS SEASON

Scratch beneath the surface a little, and you can see that there is the possibility for Sunderland to post a profit for the first time in almost two decades when the accounts for this season are posted this time next year. Sunderland will enjoy a modest but not insignificant boost to their revenues as a result of the new division-wide deal with Sky Sports coming into place.

Crucially, they will also see the benefit of the deal that saw Jack Clarke move to Ipswich Town shortly after the new season started. The deal should earn Sunderland in the region of £15 million up front, with the potential for future add-ons to be realised. With a further sale before the end of this accounting period possible, you can see how Sunderland might be able to turn a profit for this season even accounting for the players they have signed and the likelihood of their wage bill growing again.

There is a slight mitigation to this, with the accounts making clear the extent to which Sunderland sign players with modest up-front fees and then significant future bonuses dependant on performances. This makes sense when you consider when Sunderland are often investing in young talent with more uncertainty around how they will develop and perform compared to an already established senior player. The accounts reveal that Sunderland could face a future bill of nearly £30 million in transfer bonuses, though the notes add that the prospect of much of that money being realised is remote. Many of those bonuses will be related to promotion to the Premier League, in which case the bill will feel modest compared to the riches gained.

The point is that you can, to Sunderland's credit, see the way in which their model of investing heavily in their academy and in young players can allow them to compete at this level without racking up huge losses. That is genuinely an impressive achievement in the modern game.

SUNDERLAND'S REVENUES ARE IMPRESSIVE - BUT ROSE ONLY MODESTLY

Sunderland saw a huge spike in their revenues as a result of their promotion to the Championship, allowing them to better capitalise on the club's huge fanbase right across the board. Their financial performance in this season was again pretty impressive, growing their turnover to £38,152,000 from £35,543,000. For context, of the clubs to report their figures so far only Bristol City have brought in more funds without parachute payments. The results again underline the central importance of Sunderland's support to the club's viability and performance - their loyalty remains absolutely essential to success and stability. It's hugely notable that Sunderland's revenues remained so robust despite the second half of the campaign being so poor on the pitch.

Sunderland clearly believe there is a lot more they can achieve on revenue, as seen in their recent emphasis on investing in hospitality areas.

Interestingly, the wildly popular move to new partnerships with hummel and fanatics yielded only a modest increase in returns, with retail and merchandising revenues up to £2,997,00 from £2,721,000 in the previous campaign. It will be interesting to see whether those deals, which were said by the club to be record arrangements, bring in more of a dividend over the longer accounting period this season.

The notes accompanying the accounts also hail the impact of Bruce Springsteen's summer gig at the Stadium of Light, but it now seems certain that there will be no concerts in the upcoming summer period. That will be a blow to the club's revenues this season, as well as the city and its businesses more generally.

Sunderland seem to be trending in the right direction when it comes to its financial performance but there is clearly some way to go to reach the club's full potential.

SUNDERLAND'S DEBT SITUATION IS ONE TO WATCH

The accounts confirm that the club's debt to its holding company Mercator, which is of course owned by Kyril Louis-Dreyfus and Juan Sartori, rose to just shy of £20 million. This is by itself no great concern, as it is debt on which the club is not paying any interest. The club's owner also continue to insist that this will be converted to equity at some stage, which means that there are in principle no financial challenges for the club as a result of this essentially internal debt. It is interesting, though, that this has now been said for a number of years and there is no explanation as to the ongoing delay.

More concerning is a note from the club in its article accompanying the release of the accounts, which confirms that 'SAFC’s banking overdraft facility, which stood at £8.2 million on 31 July 2024, has subsequently been cleared by the Club after securing a working capital facility from an entity associated with the Louis-Dreyfus family."

This would be appear to suggest that the club have taken on some external debt, on which they will likely be paying interest. No detail has at yet been provided and this might be of a concern moving forward as if Sunderland were to take on any more external debt that required servicing, there is a long-term danger that investment on the pitch could be squeezed.

A CLUB ON THE UP

Not withstanding some of the concerns mentioned above, there is no doubt that these accounts a club on the up after its dramatic demise. There is, albeit not yet realised, a clear path to sustainability and its financial footing is far firmer than many of its divisional rivals. Equally clear is that to reach its potential off the pitch, the club needs to win promotion to the Premier League in the coming years.

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