FC Schalke 04 is in a precarious situation, both sportingly and financially – even if its business figures improved last year. If the traditional club were to be relegated, there could be a risk of bankruptcy.
At first glance, there is improvement in sight. For the 2023 financial year, FC Schalke 04 will be in the black for the first time since 2018 and will record a profit of 6.9 million euros. Accordingly, the negative equity improved to 103.3 million euros (2022: 109.8 million euros). At the same time, net financial liabilities were reduced from 139.9 million euros to 128.5 million euros.
“We are very pleased that we were able to achieve our economic goals as planned under difficult conditions,” said Chief Financial Officer Christina Rühl-Hamers on Monday afternoon (March 18, 2024). “The club has managed to improve important economic parameters.” Nevertheless, the situation is extremely tense.
A good mood has no place on the Schalke market, even if the club’s management tries to look positively into the future. After all, S04 is a football club that is in dire straits in many respects.
3rd league license probably only under conditions
The sporting situation is already very unfortunate, the Ruhr area club is only three points ahead of a direct relegation zone in the 2nd Bundesliga after the recent 2:5 debacle at Hertha BSC eight game days before the end of the season. The unbridled fall of the S04 from the Bundesliga to the 3rd league is a very realistic scenario. This would have fatal consequences – and not just for the club.
The documents for a license for the 3rd league had to be submitted to the German Football League (DFL) last week. “As far as the third league plans are concerned, we expect that the provisional license will only be granted under certain conditions,” said Rühl-Hamers. A prediction that seems quite optimistic given the circumstances.
Annual interest is 16 million euros
Because there are numerous variables when it comes to income, it is currently not possible to say specifically how the traditional club could economically survive its second relegation within a year. Or whether Schalke would even be allowed to play.
The S04 would still have to make around 16 million euros in interest payments annually. Schalke currently receives around 20 million euros from TV revenue. In the 3rd league, each club only receives around 1.31 million euros per season.
If the license is actually refused, Schalke would have to continue playing in the fourth-tier regional league, in which the “Royal Blues” second team is currently active. The majority of jobs (currently 400 at the club) will then also be at great risk.
City of Gelsenkirchen has invested in Schalke
The city of Gelsenkirchen, which has also invested a total of around 35 million euros in the stadium with its subsidiaries Stadtwerke, is apparently less optimistic than the club’s management about the club’s prospects if they change leagues.
In the event of further relegation, the city administration wrote in a draft resolution from which the “Westdeutsche Allgemeine Zeitung” (WAZ) quoted, “the financial framework conditions clearly speak against the granting of a license to participate in the games of the 3rd league and thus in favor an almost inevitable insolvency procedure”. This “would also have significant negative effects on the asset, financial and earnings situation of the municipal utilities and the city of Gelsenkirchen,” the submission continues. In other words: in the event of further decline, the city would see its investments at great risk.
2nd league would probably be fully financed
If Schalke were to keep the league, the budget would be planned according to Rühl-Hamers and would be around 25 million euros, similar to the current season. The CFO hopes that the license should then be granted without any requirements or conditions. The lower television income due to the current poor table situation (a maximum of around 15.5 million euros) could probably be offset this year by the income from the various concert events in the summer and the Euro 2024 in Gelsenkirchen.
However, at the end of the financial year – due to the negative equity – a profit would have to be made again in accordance with DFL regulations, otherwise there is a risk of points being deducted. The condition is a further reduction of five percent.
Get more out of it
A recovery of the club would probably only be possible if sporting success were achieved again. “As Schalke 04 we have to make sure we get the best out of the financial options we have. And currently and in the past we are not getting the most out of the options we have available,” said Rühl Hamers.
Schalke will now have to tremble for another eight match days.