FOOTBALL club accounts for the 2019-20 season have become a cause for concern, the big losses incurred in a partially compromised season indicating that unless normal service is resumed, 2020-21 will be a complete financial disaster. With no sign of a major change occurring before the middle of 2021, football has to come to terms with a write-off year.
Southampton are the latest club to announce a major loss in 2019-20 – £ 73.3 million, but the most relevant aspect of their financials is the fact the club’s gross debt position has risen to £ 91.3 million after taking on a new loan of £ 78.8 million from private investment firm MSD Capital, the managers of the Dell technology family’s financial affairs.
This facility is due for repayment in 2025 and carries an interest rate far in excess of their previous debt (more than 9%). Although restructuring of debt in the current climate is not unusual, the amount of debt and the high level of interest raises questions about lender perception of the club.
Southampton’s revenues for 2019-20 declined by around 15% to £ 126.6 million, although lost and deferred income totalling more than £ 30 million would have resulted in the club posting an increase of 5.5% in 2019-20. Although this is purely academic, it does show the club had positive momentum before covid-19 struck.
All revenue streams were impact by the pandemic, broadcasting declining by 17% to £ 93.5 million and matchday falling by almost 15% to £ 14 .5 million. Commercial income was down by 6.5% to £ 17.2 million.
With revenues lower, the club’s overall wage bill of £ 114 million, little changed from 2018-19, was a very unsustainable 90% of income, a rise of 13 percentage points. Of the overall total, the first team’s wages came to £ 89.6 million, representing 71% of turnover. These figures could deteriorate further in 2020-21 if an entire season is played behind closed doors, which could create challenges for the Saints.
The club’s profit on player sales was just £ 13.9 million, lower than 2018-19’s £ 20 million and some way below 2017 (£42m) and 2018 (£ 69m). The past two seasons have not only seen lower levels of profits on player sales, but have coincided with the club posting losses for the first time since 2013.
Player trading is an important part of Southampton’s business model and over the last few years, clubs like Liverpool have benefitted from the club’s production line. The Saints’ managing director, Toby Steele, reassured the fans that the financial difficulties could be eased significantly by the sale of a couple of players, but they don’t appear to have the depth of marketable talent they had before. Transfermarkt rates James Ward-Prowse (£ 22.5m) as their most valuable asset with Danny Ings (£18m), Jan Bednarek (£ 18m) and Nathan Redmond (£16.2m) also highly valued. The current squad is valued at £ 215 million.
Southampton spent in excess of £ 50 million in the transfer market in 2019-20, including £ 18 million on Ings, £15 million for Che Adams and £ 14 on Moussa Djenepo. They recouped around £ 25 million from sales. In 2020-21, they have been among the lowest spenders in the Premier League, signing Kyle Walker-Peters for £ 12 million from Tottenham and Mo Salisu from Real Valladolid for £ 11 million. To counter this, they sold Pierre-Emile Højbjerg to Spurs for £ 15 million.
The 2019-20 loss may mean a very quiet transfer window unless players are sold to fund any possible acquisition. The Saints have had a very decent season and currently sit in seventh position in the Premier League.
Ralph Hasenhüttl’s team recently beat Liverpool 1-0, an emotional evening for the manager and a game that underlined the progress made at the club since he took over, notably since they were beaten 9-0 at their own St. Mary’s stadium by Leicester City in 2019-20. Southampton’s problems would seem to be away from the field of play as they try to keep pace with the Premier elite.