Generous owner support for Stoke has not brought success on the pitch

The authoritative Swiss Ramble reviews the latest accounts of Stoke City.   Thepre-tax loss narrowed from £88m to £10m, despite revenue falling £10m (19%) from £50m to £40m and profit on player sales decreasing £2m to £1m, as they made £33m profit on the sale of stadium and training ground. Operating expenses down £55m (39%). Loss after tax was £8m.

Following four consecutive years of (small) profits between 2014 and 2017, Stoke have now posted losses four years in a row, adding up to a hefty £143m in total (£176m excluding the stadium/training ground sale). The £88m loss in 2019/20 was the highest ever in the Championship.

Revenue decline

Since relegation from the Premier League,  revenue has dropped by £87m (68%) from £127m in 2018 to £40m, very largely due to less TV money in the Championship (£73m decrease), though gate receipts and commercial are also down £8m and £7m respectively.   Even after the decrease, #SCFC £40m revenue was still 6th highest in the 2020/21 Championship, though a fair way below the clubs receiving the largest parachute payments

Main reason for the £10m revenue decrease was COVID, which drove reductions in match day, down £4.7m (97%) to just £121k, and commercial, down £1.9m (14%) to £12.0m. Broadcasting fell £2.9m (9%) to £28.3m, as lower parachute payment partly offset by deferred 2019/20 revenue.

Revenue decline has been cushioned by Premier League parachute payments, though these have fallen in each of the three years since relegation: 2019 £43m, 2020 £34m and £2021 £15m. Last season was the final tranche, so 2021/22 revenue will be even lower.

Commercial revenue fell £2m (14%) from £14m to £12m, as decrease in conference & hospitality (due to COVID) was offset by higher sponsorship.  This was the highest in the Championship in 2020/21 by some distance, well ahead of Norwichand Bristol City (both around £8m).    Of course, Stoke benefit from a good commercial agreement with their owner bet365 (shirt sponsorship and stadium naming rights). In addition, the Macron kit supplier deal has been extended to 2024.

They made £33m from selling assets to parent bet365 in advance of 1 July 2021 deadline before such transactions are excluded from FFP: stadium (proceeds £70m, profit £28m) and training ground (proceeds £15m, profit £5m). Other clubs had already done similar.

Thanks to the asset sales, the club “only” reported a £10m loss, but that was still in the bottom half of the Championship. Five clubs had losses above £20m, led by Bristol City £38m, but Stoke would have had the worst deficit in the division (i.e. £43m) without the property sales.

COVID impact in 2002/21 was £19m (revenue loss £9m, cost savings £2m & missed player sales due to depressed transfer market £11m). Total loss over last 2 years was £57m, including £30m player impairment and £4m extra costs in 2019/20 (e.g. not utilising furlough scheme).

Player sales and transfers

Profit from player sales fell from £3.1m to just £0.9m, mainly Jack Butland to Crystal Palace. Miles below the player trading profits at the three clubs relegated from the Premier League the previous season.  They only made £4m profit from player sales in the last two years, a tenth of the £40m they generated in the preceding two-year period. However, this season will be around £12m, thanks to Nathan Collins to Burnley and Sam Surridge to Forest, though many left on free transfers.

The club spent £5m on player purchases, mainly Jacob Brown from Barnsley. This was less than half the previous season and Stoke’s lowest outlay since 2015. Still in the Championship’s top ten, but less than a quarter of Brentford.  have spent relatively little on new players in the last two seasons (and only £5m in 2021/22), which is in stark contrast to the four years between 2016 and 2019, when their gross spend averaged a chunky £58m, including an incredible £67m in the first year after relegation.

Average attendance (for games played with fans) was 22,824 in 2019/20, so had dropped 6,500 since relegation, but was still 6th highest in the Championship. Ticket prices for 2022/23 were frozen, so they have been held at the same level for an incredible 15 years.

Wages

The wage bill fell £5m (8%) from £55m to £50m, which means wages have almost halved from £94m in the three years since relegation. This is the club’s lowest wage bill since £47m in 2011.  It will further fall after departure of some high earners last summer.   Despite the decrease the £50m wage bill was still 4th highest in the Championship, only surpassed by the three clubs most recently relegated from the Premier League. Stoke have enjoyed three of the top 20 wages ever in this division, so have clearly underperformed.

The wages to turnover ratio increased from 110% to 124%, though this was still only mid-table in the Championship, where the vast majority of clubs have unsustainable ratios well above 100% (with six of them over 200%). Stoke’s ratio was as low as 62% in the Premier League.

Debt

Gross debt in the football club increased by £25m from £187m to £212m, all ultimately owed to the Coates family. The good news is that Stoke have no bank debt, but this “friendly” debt with their owners has shot up by £153m in the past five years.

Gross debt of £212m is by far the highest in the Championship, far above Bournemouth £165m, Blackburn £152m and Watford £139m. In fact, in Stoke City’s holding company, the gross debt was even higher at a cool quarter of a billion.  However, since these accounts the club have reduced holding company debt by £160m after writing-off £120m of shareholder loans and converting £40m of loans to equity “in order to comply with the Secure Funding requirement of the EFL’s Profitability & Sustainability rules”.

In fairness, the debt picture is a little misleading, so long as the Coates family continues to provide support. The fact that their loans are interest-free gives Stoke a competitive advantage against a number of their rivals, who have to pay interest on their loans.

Since 2011 Stoke have had available cash of £303m: (a) £195m from owners’ loans; (b) £86m from property sales; (c) £22m operating activities (negative in last 4 years). The majority was spent on the squad (£223m), albeit with mixed results, with £74m increasing the cash balance.

The Swiss Ramble reckons that the Coates family have pumped £338m into Stoke since regaining control of the club in 2006, comprising loans £251m, share capital £2m and £86m payment for the sale of the stadium and training ground. Excluding the property sale proceeds, the Coates family have put in £195m of funding in last 10 years. That’s a lot of money, only surpassed by QPR £283m in the Championship, though fans will note that this great commitment has not always produced results on the pitch.

The owners can be praised for their financial support, but the other side of the coin is sporting success, and mistakes have clearly been made. As John Coates said, “On the field, the last four or five years have not proved to be as successful as any of us would have hoped.”