Southampton managing director: “The squad we have now enables us to return to profitability in the next two to three years”
Last January, Southampton were taken over by the sports and entertainment investment firm Sport Republic, who are targeting sustained success for the Saints as part of a multi-club group.
Southampton managing director Toby Steele says the new owners are helping the club focus on developing young talent and building on the success of its academy.
Why it matters: After heavy losses during the Covid pandemic, Steele reveals that Southampton are aiming to return to profitability in the next two to three years – with player trading still a key revenue earner for the club.
The perspective: With the Saints currently in the Premier League relegation zone, questions have been raised about the strategy of the club and its new owners.
With new owners, new backroom staff followed by the appointment of a new manager, and several new players signed in the summer, the past 12 months have seen a series of major changes at Southampton.
Back in January 2022, the club were taken over by the sports and entertainment investment firm Sport Republic, backed by Serbian billionaire businessman Dragan Solak, which acquired Chinese businessman Gao Jisheng’s 80 per cent stake.
With Solak as lead investor, Sport Republic was founded by Henrik Kraft, an investor in the technology, telecoms and media industry, and Rasmus Ankersen, who was previously co-director of football at Brentford and chairman at FC Midtjylland, the Danish club which is also owned by Matthew Benham.
Jisheng had owned Southampton since 2017, and under his reign the club had Premier League finishes of 17th, 16th, 11th and 15th – a marked decline after finishes of 14th, 8th, 7th, 6th and 8th since the club had returned to the top-flight in 2012/13.
Southampton and their new owners have made it clear they are determined to bring sustained success, with the strategy centred around the development of young players – something the club has a well-earned reputation for excelling at. Alan Shearer, Gareth Bale, Theo Walcott and Luke Shaw are among the players to have graduated from their academy.
The acquisition of the south coast side has formed part of the London-based Sport Republic’s plan to establish a multi-club group, with Southampton the first team it has acquired, followed last August by Turkish second tier side Goztepe S.K.
While the construction of that multi-club group remains a long-term project, and little is known as yet about which other clubs and territories Sport Republic are looking at, the Southampton managing director Toby Steele says the club has already been exploring the potential advantages that such a set up can bring.
“The scouting efficiencies that we can get by having a centralised team, for example, are pretty exciting,” he says, adding that being linked to other clubs across Europe, where the entry requirements for players are less strict than in the UK post-Brexit, can open up a wider pool of potential signings.
“The ability to pass players between clubs means there are opportunities to bring players into Europe as part of the group to get them minutes playing for other teams. So it's opening up lots more markets than we would have had as a standalone club under our previous ownership.”
Steele – who was speaking before Southampton’s recent slump in form – stresses that the club and its owners are aligned in particular around the importance of nurturing young talent.
“Their support of young players is probably in the near term the biggest advantage for us. They've fully bought into our strategy and philosophy of building on the success of our academy.”
The focus on youth could be seen in the summer, with Sport Republic’s first full transfer window proving to be Southampton’s most active in 15 years. Ten players came in, with six of the new signings under the age of 21, while 12 departed, either permanently or on loan, including players who had been with the club for several years, such as Nathan Redmond, Jan Bednarek and Jack Stephens.
n all, Southampton recorded a net spend of £76 million – the eighth highest in the Premier League.
While the season began encouragingly, with wins against Chelsea and Leicester City, a poor run of results in September and October was followed by the sacking of manager Ralph Hasenhuttl in early November.
The club swiftly appointed Nathan Jones from EFL Championship club Luton Town before the World Cup break, which began with the team second from bottom in the Premier League. Since the top-flight’s return, Southampton have moved to the foot of the table after two more defeats.
While the owners have understandably faced questions about the transfer strategy and the team’s performances so far this campaign, they have insisted that they are looking at the long-term picture as well as the shorter-term challenges.
With Ankersen’s passion for the innovative use of data, as seen at Brentford, and Sport Republic’s investments in sports technology businesses, one area they are unsurprisingly keen to enhance is Southampton’s data-led decision-making.
Sport Republic have minority shareholdings in a number of football-related businesses, including Tonsser, which claims to be the largest football player app and community in the world, and Sport Buff, which is said to be powering live, on-demand and archive sports video experiences to millions of users around the globe.
“They are very much focused on data and have said they'd like to do a little bit more in this area within the football side of things,” says Steele, although he adds that the changes introduced so far have been relatively subtle.
“There haven’t been wholesale changes, just a few minor tweaks, particularly around the summer transfer window. Data was heavily involved in how we looked at players and assessed them, but we just slightly tweaked some of the outputs that we had around the data that we're already collecting.
“We're not starting from a low point – we've already got a very mature process – so it's about changing a little bit of what we do rather than necessarily revolution.”
While the club hopes that its renewed focus on recruiting and developing young players can help bring consistent success on the pitch, Steele says the strategy can also bring significant financial benefits over time.
“We are profitable at an operating level but when you add on the amortisation of player transfer fees, we need to sell players to be net profitable. And I think the squad we have now enables us to return to that profitability in the next two to three years.”
He adds that while the club never consciously moved away from its focus on the development of young talent, “we just haven't had as much success with this in recent years. So nothing's changed, it's just whether we've had people coming out of the academy system that we've been able to sell.
“What we look for is players making their first or potentially second move, so that they're hungry, and they want to come and play for Southampton understanding that this may mean they either stay here long term, or they move on to their next step.
“Where we've had players that have made a sideways move, or even slight downward step, coming to Southampton wasn’t seen as such a big opportunity for them. And that's where we've had a number of players that haven't quite worked out as we would want.
“If you look at the players that we bought this summer, for all of them – bar one where we needed a more experienced player in a particular position – this is all a step up and an opportunity to play first team football. And that's really encouraging because their desire to then succeed is greater than somebody who's perhaps played 100 games already in the Premier League – are we just another club for them?”
Southampton posted losses of £73.3 million in 2019/20 and £13.7 million in 2020/21, with the club pointing to lost revenues of £10.3 million in 2019/20 and £30.1 million in 2020/21 due to the impact of Covid-19.
The Saints are yet to announce their financial results for 2021/22 but are set to make their fourth consecutive loss, amounting to £17 million before tax according to Off The Pitch estimates.
Steele admits that during the pandemic, in addition to lost matchday and broadcast revenue, the club suffered from the slump in the transfer market.
“Our Covid losses were high like everybody else's,” he says. “I think the area that people don't recognise is what happened in the transfer market, particularly in Europe at that time. We had four players that we probably would have had £20 million transfer fees for [pre-Covid] – and that's being conservative – but we got £5 million for each of those players.
“So that, on top of the lost revenue from not having fans and the broadcast rebates, was quite a big bit of our business we lost as well. But we're through all of that now.”
He adds: “And what's great about the new ownership group is that they're very supportive. We had a net spend in the summer transfer window for the first time, I think pretty much since I've been here, which they helped to fund.”
