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SUNDERLAND LIMITED – ACCOUNTS FOR THE YEAR ENDED 31 JULY 2017


HIGHLIGHTS

Turnover - £126.4m (2016 - £108.1m)

Loss before taxation – £5.7m (2016 - £24.9m)

Net interest payable - £4.1m (2016 - £8.1m)

Loss after taxation and interest - £9.5m (2016 – 33m)

Cash in hand (bank current account) - £36m (2016 – 26.9m)

Drumaville loan - £91m (£69.4m)

SBC loan - £70.8m (£67.9m)


This has to be one of the more difficult sets of accounts I’ve had to try and interpret. I’ll try and explain as I go along.

Turnover

The increase in turnover is entirely down to the new TV deal. Other income streams were trending downwards; the fall in gate income even last season does not bode well for this year’s figures. It’s hard to avoid the assumption that that could have dropped as low as £6m this season, with a knock on effect on other income streams. I had assumed that this season’s turnover would still be around £75-80m; I‘m now inclined to reduce that by about £5m.

Staff Costs (£84.4m (2016 £83.9m))

This is the first of a few slightly oddball numbers in these accounts where, in the absence of a more detailed analysis beyond minimum legal disclosures, a certain amount of speculation is needed. I think we were all expecting a decrease here. At least in part, there will be wage costs associated with the redundancy programme, but it also seems very evident that a) incoming players were not being paid less, in general, than those leaving in summer 2016, and b) we must be making substantial contributions to the wages of any players out on loan. This suggests that previous estimates for this season’s wage bill are likely to have been understated – it’s hard to see how it will have fallen to much under £45m this year.

Player trading (including transfer debtors and creditors)

Key points to note:

1. Additions to intangibles of £47.1m, and a related cash outlay of £41.8m, are far higher than the commonly quoted transfer fees for 2016/17. As the amounts capitalised include signing on and agents’ fees, these must clearly have been substantial.

2. The club have recognised a permanent impairment to carrying values of players still here of £14.3m. Much of this probably relates to Borini and Lens, where the transfer fees receivable will clearly be below what we paid for them

3. The cash figures for disposals, and the amount in the bank at the year end suggests that much of the Pickford fee was upfront.

4. The player creditor figure remains worrying – we were committed to paying £23.3m this season, and £22m next season. As it’s highly unlikely that these amounts have been paid off by Short (though this is not impossible), this could be the immediate problem for new owners, especially as we only have £2.9m of debtors due next year.

Other operating charges (£32.3m, 2016 £16.7m)

This is another number that’s got me a little bit stumped. It’s clear that the cost of the Alvarez settlement is a substantial chunk of the change, but that still leaves an increase of around £6m. the only thing I can think of is that there has been some kind of internal reorganisation this year, and that the costs have been provided for in the kind of “tidying up” exercise beloved of new CEO’s wanting to clear out all the bad news in their first year in the job.

Gross debt

It’s clear that Short injected cash last year to cover the trading loss and the costs of the Alvarez case. The movement on the SBC loan are due to the weird and wonderful valuation methods imposed by a new accounting standard (FRS 102), which obfuscate understanding even for professionals, and make them utterly impenetrable for laymen. Suffice it to say that the amount actually repayable to SBC remained unchanged.

I’m sure I haven’t covered everybody’s queries – anything unanswered I’ll try to respond to.

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