Sunderland blames pay for profits fall

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Sunderland, the Premiership side striving to avoid an impending relegation battle, warned yesterday that a tough season would leave it facing greater second-half losses.

The club, which is lying sixth from the bottom, said rising wages, a lack of success in knock-out cup ties and the financial pain of finishing close to the bottom would hit profits at the operating level.

Bryan Sanderson, the chairman, said: "The current, hard-fought Premiership season is proving to be the tightest and closest contested race for some years. Performances on the pitch have affected our results off it."

Hugh Roberts, the chief executive, said each league place forfeited cost the team £400,000 in lost "merit payments from BSkyB". Sunderland has four games left to play.

The group blamed an operating loss of £200,000 for the six months to 31 January on its investment in the squad. It said the costs of writing down new players, including Bernt Haas and Joachim Bjorklund, had doubled to £6.2m.

However, the £5m profits booked on player disposals – such as Don Hutchinson and Danny Dichio – helped Sunderland to post a 26 per cent increase in pre-tax profit to £4.4m. Turnover rose to £26.9m from £25.5m, boosted by a 31 per cent increase in television and media income.

While football shares have fallen out of favour, Sunderland is highly regarded in the City as one of the few quoted clubs to make a profit. One analyst said: "It's an absolute model of how to run a football club. It's got a long-term strategy in its youth training academy and brand development. Even after a bad performance it is still profitable."

Despite the lure of the lucrative three-year media rights deal struck with BSkyB last year, Sunderland has kept its wage costs from spiralling. Mr Roberts said that at 46 per cent of turnover they were well below the club's 55 per cent ceiling but would rise to about 54 per cent in the second half.

Mr Roberts swept aside concern that the furore surrounding ITV Digital would affect future television revenues. "I'm really bullish. The Premiership brand is enormous in Britain, Europe and the rest of the world. Having a Premiership contract is really important for media companies."

The club has put plans to increase the 48,300 capacity at its Stadium of Light on hold until its performance on the field improves.