Birmingham City's successful promotion push last season came at a hefty cost, after it emerged that the club recorded a pre-tax loss of £20.5 million.
The astonishing figure has been revealed in the club’s audited financial statement for the year ending August 31 2009, therefore a debt amassed under the former owners.
The directors’ report blames the huge loss on ‘the decision taken by the previous members of the board to retain most of their playing staff from the previous Premier League season’.
That decision to arm Alex McLeish with a squad on top flight wages in the Championship saw Blues fork out staff costs of £27.1 million in 2009, compared to £26.6 million the previous year.
That was further hit by a fall of over £22 million (44.8 per cent) in turnover, including match receipts, broadcasting and commercial income.
The accounts will further infuriate Blues' new owners, who already strongly feel that they were misled during last year’s takeover.
The Carson Yeung camp were fuming when they discovered that the previous owners had paid themselves advanced 2010 management fees worth £420,000, after which an offer from David Sullivan to pay back half was turned down, not to mention ex-MD Karren Brady’s controversial £1 million severance package.
While Yeung paid £1-a-share to buy Blues in October, the Chinese now believe that 30p-a-share would have been a fairer price.
A Blues source told the Birmingham Mail that the current board weren’t yet willing to comment publicly on the hefty pre-tax loss, largely as they feel that the figures speak for themselves.
The recent report also warns that, when it comes to McLeish’s future transfer kitty, the purse strings may have to be tightened in order to address last year’s loss.
It reads: “The acquisition of players and their related payroll costs are deemed the core activity risk and, whilst assisting the manager in improving the playing squad, the board is mindful of the pitfalls that are inherent in this area of the business.
“The aim is therefore to manage these costs whilst being as competitive as possible within the club’s financial constraints.”
However, former co-owner Sullivan defended the previous Blues board. Sullivan insists that they made no secret of a financial problem at St Andrew’s during the final months of their tenure and pointed out that automatic promotion back to the Premier League proved that they were right to stick with an expensively-assembled squad in the Championship.
“We are surprised the figures are quite as high as this,” admitted Sullivan. “We had a policy of retaining the squad to get back up which we thought was the correct policy and was vindicated because the club got promotion at the first opportunity automatically.
“Last summer we knew the club had a financial problem as we publicly stated we loaned it £5 million to pay the deposits on two new players because there was no money to do that.
“Some of the losses are the way accounting practices write players off over the period of their contracts although the money is paid over an early period.
“But I am sure the club will make £10-15 million in the Premier League this year.”