Project Breakeven is Unrealistic

It’s no secret that Sandgaard’s popularity has taken a hit in the last few months.

Perhaps it was inevitable, after all the Addicks are mid-table in the third tier once again, and therefore unhappy supporters are less likely to tolerate the “eccentricities” of the owner.

However, it does appear that Sandgaard’s strategy has changed since the end of the season, and Project Breakeven has overtaken Project Premier League™ as the primary focus. Cost-cutting, particularly at academy level was never going to look good and doesn’t seem to make sense. Sandgaard obviously knows that getting a few kids to buy their own kits and pay for travel won’t solve the underlying £10m problem, so why do it? It was inevitably leaked and has created a PR nightmare for the club.

When attempting to reduce costs, the biggest lever that any football club can pull is wages, particularly player wages. This is no different at Charlton where wages have been larger than total income in 7 of the last 10 seasons. With this in mind, surely the first target should be getting the likes of Forster-Caskey off the books?

However, it seems unlikely the wage bill can be cut much further if Sandgaard is serious about competing for promotion. The latest accounts (covering the 2020/21 season) show that Charlton’s total wage bill was at its lowest since 2011/12 when Powell won the league. In 2018/19 when Charlton were last promoted, the wage bill was 11% higher. Therefore, investment is likely needed to get promoted. However, to give Sandgaard the benefit of the doubt, it is unclear how much of the wage reduction was belt tightening driven by COVID rather than club-imposed reductions. Most clubs reduced their wage bill during the uncertainty of COVID, preferring to give young players a chance in the place of experienced professionals. Regardless, the 2021/22 accounts will give a clearer picture on the cause.

The other side of Project Breakeven relies on raising income, this is more difficult and far less realistic. Generally, football club revenue can be sorted into one of three streams, broadcast revenue, matchday and ticketing revenue, or commercial revenue. While in League One, Charlton will be unable to influence broadcast income much and will therefore have to increase matchday and commercial revenue significantly if they are ever to reach this goal. Sandgaard has publicly stated that he can double income at League One level, criticising former owners for being unable to achieve this.

Frankly, this is fantasy. If Charlton were to succeed in Sandgaard’s aims, then they would need to increase both commercial and matchday revenue beyond their previous Championship heights. For example, in the last 20 years, Charlton’s commercial income has rarely risen above £4m, and this only occurred in seasons when the Addicks were in the Premier League. Since Duchatelet took over, commercial income has generally floated between £1.1m and £1.6m, the exception being the £2.1m received in the 2019/20 season when COVID struck and games were streamed on Charlton TV.

Even if Charlton were to miraculously achieve that £4m commercial income, then they would still need to plug a remaining £6m gap by more than doubling match day income to a total of £10m, a figure not seen at the Valley since dropping out of the Premier League in 2007.

Player sales are the only other source of income that Charlton could use to plug the gap, an area that Charlton have done quite well in. However, this is not a stable source of income, relies on having players actually worth selling, and obviously weakens the team if not adequately replaced.

Overall, Sandgaard’s vision of breaking even is just that, a vision. The club can’t reduce the wage bill much further without impacting league position and Sandgaard’s belief that income can be trebled in League One is ambitious at best.