Can Stoke break out of their malaise?

Stoke City’s 2023/24 financial results covered a season when they finished 17th in the Championship, which means that they have now finished in the bottom half of the table six years in a row since their relegation from the Premier League in 2018. Recent results are in stark contrast to their time in the top flight, when they finished 9th in three consecutive seasons up to 2015/16.

Stoke’s vice-chairman, Richard Smith, said, “I don’t think we’ve made any secret of the fact we want to get back into the Premier League. We spent 10 years there but we’ve been out of it for a while now and we’re very keen to get back up there.”

To that end, Stoke have been among the bigger spenders in England’s second tier, but to no avail. They are backed by the wealth of bet365, but have been constrained by the need to comply with the EFL’s Profitability and Sustainability regulations, though it’s also true that they did not make the most of the parachute payments they received after relegation.  

They have not been helped by frequent changes in the manager, which has led to much upheaval in the squad.  Seven managers that have been tasked with restoring Stoke’s fortunes on the pitch since the club dropped down to the Championship seven years ago (excluding caretaker appointments) – and Michael O’Neill was in charge for nearly half of that period.

Losses double

The magnitude of Stoke’s challenge was highlighted by the 2023/24 accounts, when their pre-tax loss more than doubled from £11.0m to £25.7m, mainly because profit from player sales reduced from £15.3m to £4.4m. Revenue rose £1.1m (3%) from £31.2m to £32.3m, but this was more than offset by cost growth, as operating expenses increased £5.1m (9%) from £57.9m to £63.0m. The loss after tax was even higher at £28.8m, due to a £3.1m tax charge.

The club said that “the trading losses demonstrate the cost of operating in the Championship”, which is undoubtedly true, given that around three-quarters of the clubs reported losses of more than £10m in their most recent accounts.    Stoke’s £30.8m operating loss is the largest reported to date in 2023/24, above Middlesbrough £29.0m, Hull City £26.4m and Bristol City £22.3m.

Stoke have now posted losses in six of the last seven seasons, the only exception being the year that benefited from a substantial loan write-off. This is very different from their time in the Premier League, when the club frequently managed to make (small) profits.  This period included a huge £88m loss in 2019/20, which is actually the largest ever recorded in the Championship, far above Aston Villa £69m (2018/19) and Leeds United £62m (2019/20).

Since relegation from the Premier League, Stoke’s revenue has dropped by three-quarters, falling £95m from £127m in 2017/18 to £32m, almost entirely due to less TV money in the Championship (a £91m decrease), though gate receipts and commercial are also down by £2m apiece.  Stoke’s £32m revenue is one of the highest in the Championship – if you exclude the clubs that benefit from Premier League parachute payments, whose revenue is normally twice as much.

Of course, Stoke benefit from a very good commercial agreement with their owner bet365, which covers shirt sponsorship and stadium naming rights. In addition, the Macron kit supplier deal has been extended three times, currently running to the end of the 2026/27 season. To underline the importance of commercial operations to their business model, Stoke City earned 52% of their total revenue from these activities, which is the second highest in the Championship.

Stoke support the potential establishment of an Independent Football Regulator, hoping for an improved financial distribution model for TV monies between the Premier League and the EFL.

Stoke’s average attendance rose 9% from 20,678 to 22,517. The board said, “It was encouraging to see that the hard work the club has put in to engaging positively with fans has seen this first increase in league attendances for five years.”  Nevertheless, crowds have still fallen by a quarter (6,800) from 29,280 in the last season in the Premier League.   Despite last season’s increase, Stoke’s average attendance of 22,517 was only mid-table in the Championship in 2023/24, a fair way below the likes of Sunderland 41,028, Leeds United 35,989 and Leicester City 31,238.

Wage bill

Stoke’s £34.4m wage bill was actually the sixth highest in the Championship, albeit a lot lower than the wages paid by clubs benefiting from parachute payments, e.g. Burnley £54m in 2022/23 and Norwich City £52m last season.  It was actually the second most paid by any of the non-parachute clubs, just below Bristol City’s £34.9m. In other words, they have enjoyed an advantage against most other teams in the division, so really should have done a lot better in the league.

Stoke’s £20.4m other expenses are among the highest in the Championship. Like other clubs, they have had to face the challenge of the continued rise in inflation, especially the dramatic increase in energy costs.   They will also be affected by the increase in employers’ national insurance payments.

Backing from the Coates family

Stoke’s gross financial debt in the football club increased by £29m from £122m to £151m, all ultimately owed to the Coates family, as there is no bank debt. This had been as high as £212m in 2021/22 before the owners waived £120m of debt.  Stoke’s gross financial debt in the football club increased by £29m from £122m to £151m, all ultimately owed to the Coates family, as there is no bank debt. This had been as high as £212m in 2021/22 before the owners waived £120m of debt.

However, things have greatly improved since these accounts, after all the intra-group loans were cleared last July as part of the transaction whereby the holding company allotted £133m share capital for £46m cash and £87m assets, with the stadium and training ground being transferred from bet365.   Even before this generous gesture, Stoke had enjoyed a competitive advantage against a number of their rivals, as the owner loans were interest-free, while other clubs had to pay interest on external debt.

The Swiss Ramble estimates that the Coates family have pumped a chunky £350m into Stoke City since regaining control of the club in 2006, comprising loans £251m, share capital £14m and £86m payment for the sale of the stadium and training ground.

There’s no doubt that PSR restrictions have been a major source of frustration to Stoke’s owners: “The directors are currently restricted from implementing their full plans for the club as a result of the financial regulations implemented by the EFL in the Championship that currently prevent their use of sustainable investments that would otherwise be made.”

It is certainly true that the owners have provided strong financial backing to a whole raft of managers, but the performances on the pitch have left a lot to be desired. Indeed, in the past few years the club has finished closer to relegation from the Championship than promotion back to the Premier League

The supporters will hope that the latest appointment of Mark Robins will change things for the better, but it’s a big ask, given that the longer that Stoke have spent in the Championship, the more difficult it has become for them to break out of their current malaise.

Recent economic news from the Potteries has not been good with the historic ceramics industry on its knees, exemplified by the closure of Royal Stafford in Burslem.   High energy prices are helping to kill off the historic industry and greater success for Stoke City would be a morale boost.