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Episode 415: The Club's £53.9 million loss...
101 Plays21 days ago
Southampton – Time to make the most of a very short breather between games and look through the 24/25 financial accounts that have just been released!
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Transcript
Introduction and Host Update
00:00:13
DailySaintsPod
Hello and welcome back to the Daily Saints pod. My name is Greg and unfortunately today not joined by my good friend and wonderful co-host Zach because cause scheduling's hard life. We're busy people.
00:00:28
DailySaintsPod
It doesn't always come together but it's all right. Don't panic because I have got lots to talk about.
Analyzing Club Accounts
00:00:35
DailySaintsPod
I'm sure you saw at the weekend or maybe I'm not so sure. I don't know because they tried to sneak it under the radar amidst all of the joy and news of this Arsenal result at the weekend. And of course this big win on Tuesday, but there was publishing of the accounts of the club and it's a football group for the year ending June 25. So it's the 24 25 season.
00:01:02
DailySaintsPod
And look, The Echo reported on it, and they wrote a wonderful article summarizing it. Of course, Alfie House doing good work. And I read through it. I thought, you know what? This is a good summary, but want to get in with a nitty-gritty and see if I can really
Understanding Financial Losses
00:01:16
DailySaintsPod
understand it. So instead, I went Companies House, and And i found the full accounts, which is, of course, publicly available and published. And I sat and I read all 41 pages of it. And it was dry.
00:01:35
DailySaintsPod
Very, very dry. So to spare you that... To spare you having to do that and get an understanding, or of course, took some notes, both from the the Echo article and from the accounts in full, of things that jumped out and interested me. I'm not going to dive too deeply into like the actual numbers and like mathematical analysis for a whole myriad of reasons, but not least because...
00:02:06
DailySaintsPod
I am not a financial expert by any stretch of the imagination. I am a bloke who enjoys watching his team play football. and And finance is not part of my day job.
00:02:20
DailySaintsPod
It's not part of anything that I do. It's not for me, right? it's But of course, we've got to touch on the the main numbers and the key parts to get get a proper understanding of of where
PSR Rules and Financial Position
00:02:34
DailySaintsPod
we're at. So of course, the number that jumped out of the headline is it was sort a recorded loss of 53.9 million, which has worked out as a pre-tax interest loss of 33.6 million made up of 9.9 million operating loss before player trading, 23.7 million loss on player trading. So of course this all relates to the 24-25 season, which was the Premier League season.
00:03:08
DailySaintsPod
And, you know, if you compare that to the previous three years, In 2023, the year we got relegated from the Premier League the first time, we lost $87 million. of course, we turned a profit of million. It means over the three years we've lost 129 million, which, course, instantly probably triggers red alarms for anyone who pays attention to any kind of the the back-end stuff because PSR rules...
00:03:40
DailySaintsPod
Slightly different for the Premier League and the Championship. The Premier League £105 million over three years, I think, and the Championship is lower. it's I think it's like £39 million over three years. But effectively, the way it works out, because you get different allowances for when you go up, and when you come down, is that Saints are allowed to lose £83 million.
00:04:04
DailySaintsPod
across the three years pre-tax. So obviously the 129 million that, but...
00:04:13
DailySaintsPod
sounds sounds higher than that but important to note, it doesn't mean we've breached PSR.
Revenue Growth from Deals
00:04:20
DailySaintsPod
There are exclusions for Academy stuff and women's team and other investments and like ground investments. It's all really complicated and...
00:04:36
DailySaintsPod
and deep you You have to go really deep in to the depths of it to to work it out. But I think it's pretty safe to say that we're not in breach.
00:04:50
DailySaintsPod
you know There's enough exclusions and we're close enough to that amount that I fully believe and that that we're okay. So that's that's like the important part, tick. Obviously worth noting as well from those figures, right? 87 million loss. In the season we got relegated the first time and a 59.3 million loss.
00:05:12
DailySaintsPod
This season, or last season this relegation.
00:05:18
DailySaintsPod
And, you know, that's less. We've lost less in the in that period of time. It's...
00:05:28
DailySaintsPod
it's interesting that that when you break down and look through the accounts and I did it, I've done it previously. i did it for last year and I did it a bit for the, we were sort of looking, trying to work out what was going on with finances with sports public. And it's, it's all buried very deep. Uh, it's all with lots of legalese and words around it. And, uh,
00:05:51
DailySaintsPod
But it's interesting. So I've gone through and read the whole report they write and they or summarized why there were losses, where there were profits previously, and and what the cause is.
00:06:08
DailySaintsPod
Of course, this is all about last season. So there was an increase of TV money gained because the Premier League paid substantially more than the championship because the TV deal.
Player Trading and Investments
00:06:22
DailySaintsPod
One of the significant increases in turnover that they noted was the 110% increase in commercial revenue from commercial partnerships, which they put down mainly to payment of their main sponsor, so of course, controversial as it was at the time, but Sportsbet, the gambling company that was on our shirts, but that that pushed the commercial revenue from $9.9 million to $20.8 million. So, obviously, I just paid a substantial amount, which is going to go a long way to to do things in this. The matchday revenue itself was up 3.1% on the previous Premier League season. And obviously up quite a lot from the season of the championship. They attributed that to an incredibly successful sold out season ticket campaign and all their hospitality packages doing extremely well.
00:07:20
DailySaintsPod
and And the other revenue side of stuff saw an increase as well. But that is mostly grants for stuff like the Academy, which you're talking about in talking about like needles in the the he was crew about like a couple of thousand pound here and there compared to the sort of millions that go on otherwise.
00:07:40
DailySaintsPod
Obviously, the notable loss is the player trading. And they say a lot of that comes from the amortization. Now, if you don't know what that is, don't worry, you're not alone. I had no idea. I had to look it up. But effectively, it is the additional charge that's accrued for spreading the cost or the fee of players. So profits were generated from player sales such as Charlie Alcoraz, Sekumara, Lianco, Chaletsar.
00:08:15
DailySaintsPod
And as a result, of course, of promotions to the Premier League at the start the season, significant investment was made in this playing squad. Now, this is, of course, if you remember, Hawa Bellis, which was, i think, 20 million.
Financial Strategies and KPIs
00:08:27
DailySaintsPod
Ramsdale, which was like 29 million. That was a club record.
00:08:32
DailySaintsPod
Flynn Downs came in, and that was like 18 million, I think. Archer, Fernandez, Matty Fernandez, of course, Ben Brinton-Diaz, Sugawara, Joaquin Kaisander, Nathan Wood, Ronnie Edwards, and Juan listed here.
00:08:50
DailySaintsPod
like Interesting when you look back and think that You know, three of those players are, I would say, in regular rotation squad. Four, if you include Archer, who is sort of in and about it, even with his falloff in form. And the rest, I mean, either gone or going, right? It's...
00:09:13
DailySaintsPod
Fascinating, fascinating set of investment. But course, expecting a loss when you're investing that heavily on trying to stay up in the Premier League, it's effective as it comes.
00:09:26
DailySaintsPod
The other points of note, obviously it went into huge amounts of detail about the spendings of the donations to the Saints Foundation and...
00:09:36
DailySaintsPod
and you know All of the the revenue generated and the investment in the structural stuff like converting the Dell, building the northern fan zone, the fences, converting the safe standing, all comes under this period of of financial time. The initial investment in level one as well.
00:10:00
DailySaintsPod
So you know all investment in stuff that I'm sure we will see this time next year when the the accounts for this year are stuff to sort of strengthen us financially. you know, even if it's worth taking the a hit in that, in that interim period. it's, it's interesting that the increase in turnover is so huge moving up thoroughly compared to the championship.
00:10:25
DailySaintsPod
it really shows it's really important for us to get back there is sort of the overall summary. It goes on to mention in the report some stuff about that later on, which I will get to.
00:10:39
DailySaintsPod
Also of note to me, no dividends were paid to shareholders or directors. Of course, naturally when you're making a loss, isn't there was a payout directors for management services, which I think, It's just the posh way of saying salary it totaled 4 million across the entire board of directors with the highest paid director getting 1.1 million, which I think is is pretty much the standard.
00:11:05
DailySaintsPod
Although I'm sure to to anyone like me, it sounds like an awful lot of money, certainly not what my salary is at. But
Importance of Promotion for Finances
00:11:12
DailySaintsPod
that's the way is when you're dealing with these big financial behemoths.
00:11:18
DailySaintsPod
I found it very interesting that they listed a full set of key performance indicators for directors. And if you you want to go on there and read it, do. It has the exact amount that hit within the 24-25 period, as well as the previous year and how it compares. But the ones that jumped off the page to me and are worth talking about are players representing their country at international level. It's something that they measure as a point of success and key performance.
00:11:51
DailySaintsPod
Academy players playing in the first team, they measure as a point of success and point of performance. Academy players representing their country at under-21s level and and all stuff like that. There's also stuff like effective
00:12:09
DailySaintsPod
wage percent versus use of staff. It all gets slightly over my head at that point. But but the the football part of it that jumped out at me as interesting is that that's something that they hold themselves as as performance indicators for, is how many players within our first team represent their country on an international level. It's just that sort of thing you think about until you read it like that.
00:12:36
DailySaintsPod
And also key points, we paid you know money off of loans and paid interest to, not to the loan on Sports Republic, which I did see someone talking about, but we paid interest on our other loans and on our other players' interestingly, but we did refinance a loan we have with MSD Holdings, which is quite a big loan that was taken out, i believe, in 2020.
00:13:05
DailySaintsPod
It's reef been refinanced, restructured, and... presumably in a way that's going to benefit us, although they don't really go into detail about that, but they do mark it as one of the key points in their shareholders' notes as things that the board has done as a significant decision in an effort to improve finances. So that will be interesting. Hopefully and presumably that means that it will incur less of a cost year on year.
00:13:57
DailySaintsPod
too much. We want good football. We want 16 games unbeaten. We want to go enjoy watching our team play. And whilst I'm sure we all understand that the path to success with one is the path to success with the other, you know I don't think many of us are going to be sitting and reading the 41-page document.
00:14:16
DailySaintsPod
or or worrying too much about it. But what is particularly interesting, because obviously in that context, we have said, or I have at least gone on record said, I'd probably prefer another year in the championship and to win the f FA Cup.
00:14:42
DailySaintsPod
it kind of has to change your opinion because the forecasts for the next year are positive generally across the whole, like improvements and revenue increase. But there is a little paragraph that obviously jumped off the page, which is, in the event that the club is not promoted to the Premier League, the club will incur a further reduction in turnover as well as the TV revenue staying low, the amount of parachute payments received will reduce in accordance with Premier League regulations for season 26-27. Effectively, we will not get as much, if any, parachute payments.
Implications of Not Achieving Promotion
00:15:21
DailySaintsPod
It says the club will be required at that point to take steps to reduce costs further and borrowings reduce borrowings to a more sustainable level. In this scenario, the club would expect a reduction in wages and salaries, which will largely be achieved by contractual means existing in player and employee contracts and player sales or loans.
00:15:56
DailySaintsPod
So... Yeah, if if we don't get promoted, the dream of building that dream squad and doing it next year becomes significantly harder because we are going to have to sell players at a profit to survive effectively. You know, as with all clubs, we are living on a financial year to financial year basis. And that's that's kind of only sustainable if you you actually do well. And so now it becomes apparent why it's been so important, right? There was a lot of people saying, and yeah and me and Zach included in this, from very get-go, oh, we just need to write this season off. We're never going to get promotion from where we are.
00:16:41
DailySaintsPod
And obviously, Tonda has done phenomenal things to get to where we are and push to the point where you know a lot of talk in the Echo and on the buzz on socials is automatic promotion even possible.
00:16:55
DailySaintsPod
And and yeah we've talked about that on the show. I don't know. i don't know if we have to We have to win at least two more games than Ipswich win and beat them at and have other results go our way. is that Is that viable with a cup semi-final thrown in there as well? Playing every four days?
00:17:13
DailySaintsPod
I guess only time will actually tell, but but it shows that it's incredibly important to the future of the club for us to get promoted, regardless of what we think that means in the terms of the football, because,
00:17:26
DailySaintsPod
you know, i don't think we are going to be in like, going out of existence trouble.
Investments in Infrastructure
00:17:32
DailySaintsPod
That's not how it reads, but it's not going to be like the hunky-dory comfy keep all our players, go at it again, keep this squad together and do it that that perhaps we were hoping for.
00:17:44
DailySaintsPod
So... Yeah, it's it's an interesting one. It's a fascinating read. And and look if you if you fancy it and you you're into that sort of thing, by all means do. Some of it's quite accessible. there's you know The first couple of pages are a nice summary that break it down quite nicely.
00:18:06
DailySaintsPod
But like said, goes into huge detail, all of all of the numbers. But on the whole, you know aside from the big headline number that is is obviously a pretty scary number to report as a loss, it's just kind of what happens when you get relegated from the Premier League after investing you know quite heavily in players. And I would expect We'd expect it to change next year. And the sort of mitigation has been put in place for that.
00:18:35
DailySaintsPod
And I guess we've seen that as we continued in the transfer windows. and you And we talk about how we trimmed the squad or made wise investments here and there. But I think that the whole piece is coming together.
00:18:50
DailySaintsPod
And... Yeah, is it's very, very interesting a time to be a Saints fan. And look, let's just hope we don't have to worry too much about it. And promotion the name of game at this point. That's what we need. That's what we're aiming for.
00:19:06
DailySaintsPod
So let's do it. Why not? sounds Sounds good to me. That's for sure. But yeah, lots of lots of talk in the entire report about the importance of matchday revenue and and the infrastructure building they're doing and in an effort to increase the revenue as well.
00:19:27
DailySaintsPod
So... Yeah, all all of the stuff you expect and all the stuff we've observed as well, right? The club trying to, or the owners investing in the club to try and make the club more sustainable, more efficient, more revenue generating so that they can go and spend the big money on the big players if and when it becomes time.
00:19:51
DailySaintsPod
but But that's a thought for the
Conclusion and Audience Engagement
00:19:54
DailySaintsPod
future. Yeah. The good news is now probably not broken PSR. All seems to fall well within the limits. So it's interesting how close the line it can can be. Because I think it's probably closer than anyone was expecting.
00:20:11
DailySaintsPod
But... Yeah, good stuff. I hope that that has been interesting. interesting I hope that I have summarized it reasonably well. Like I say, it was pretty tough going, a pretty tough read. So yeah, it was a a tough one to break down, but I hope you've enjoyed it.
00:20:29
DailySaintsPod
Yeah, let me know in the socials, in the comments. what What do you think? just Does having an understanding of this now mean the promotion is more important to you than the FA Cup?
00:20:42
DailySaintsPod
Do you still feel the same regardless of it? How do you think we can go? Do you think we're going to be able to keep the squad even if we go up? yeah and I hope so. At least most of it. That's that's what we really want to see.
00:20:56
DailySaintsPod
So fingers crossed. But yeah, we are Daily Saints pod absolutely everywhere. X, Blue Sky, TikTok, Instagram, Facebook, YouTube. Hit us up. Let us know because we'd love hearing from you. And in particular, I cannot wait to hear some of your opinions on this.
00:21:14
DailySaintsPod
We will be back tomorrow with our big match preview for the Derby game this Saturday. But until then, everyone, I hope you have a wonderful day and we will see you then.