Wages, FFP, furlough and a £2.5m rent: Sheffield Wednesday's 2019/20 accounts explained in plain English

Here we go again. Another set of Sheffield Wednesday accounts.

By Alex Miller
Tuesday, 6th July 2021, 6:12 pm

To most it is something of a Matrix wall of numbers, difficult to decipher.

So we called in football finance expert Kieran Maguire, lecturer at Liverpool University and one half of the Price of Football podcast, to drag his expert eye over Wednesday’s accounts for the 2019/20 season.

In plain English, here we go..

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Sheffield Wednesday have released their 2019/20 accounts.

So, what are the headline takes?

Over to Keiran: “The club has had a challenging year, clearly Covid-impacted at the end of the season, which didn’t help.

“They have what I guess you could call legacy costs in that they had in 2020 quite a few players on very good wage deals that they simply couldn’t get rid of. They struggled to get the wage bill down and that is the major contributing factor towards big losses.

“It’s fair to compare to other clubs in that league it’s a reasonable loss; Reading lost £44m, Brentford lost £34m, Forest £33m, Leeds lost £66m, though they had to pay promotion bonuses. The average loss was £25m, so Wednesday are on a fairly standard position on that front.

“It’s a beast of a division from a financial perspective because everybody plays casino with the aim of getting promoted.”

Covid – how much of an impact has that had?

The opening lines of the accounts ‘Strategic Performance’ section read: “Turnover fell by £1.9m to £20.9m (£22.8m 2019) primarily due to the loss of five home games being played behind closed doors, due to the Covid 19 pandemic.”

In line with the Government scheme, Owls owner Dejphon Chansiri furloughed non-footballing staff whilst operations were on hold in the early stages of the pandemic response and ‘topped-up’ the remaining 20% of wages owed to them.

The accounts reveal a little more about the furlough situation, Maguire said: “It looks like they got £889k in furlough money, which they are perfectly entitled to claim.

“The fact that we’re talking about Sheffield Wednesday in existence? The whole idea behind the availability was to keep companies going and Sheffield Wednesday is a company.

“That fee has come from the public purse and will have been spent almost overwhelmingly on non-football staff.

“That covers the first three or four months of furlough and there will be more that spread into the next year’s accounts.”

Where does this leave them from an FFP point of view?

Maguire sees no red flag issues with regard to Financial Fair Play (FFP) or any notion of a points deduction given the club are benefiting from the money raised by the sale of their Hillsborough stadium in 2019.

The rules are changed also for clubs who drop to League One from the Championship.

“In League One FFP is based on a percentage of your revenue,” Maguire said. “Wednesday’s big challenge will be to get their wage bill down, which they have continued to do with the outgoing players.

“You do get some parachute payments because of the difference in TV money, though nothing like the amounts from the drop from the Premier League to the Championship.

“I don’t see a huge problem with Financial Fair Play because it’s assessed over a three-year period and Wednesday still have the benefits of the sale of Hillsborough in 2019 to offset the losses elsewhere.”

So the Hillsborough sale was a good thing?

Not quite. Beyond the fact the club don’t technically own the stadium is the points deduction and subsequent relegation suffered off the back of the botched accounting of its sale, the club are now paying around a quarter of a million in rent to play in it.

“Now that they have sold the ground, they are having to rent it,” Kieran said. “They paid £2.5m in rent compared to around £200k in 2019.

“So whilst they have the FFP benefits of selling Hillsborough the previous year, there is a downside in that they are shelling out much more in return.

“He lent the club £7.5m in 2019 and that looks to have been repaid in 2020.”

What does it tell us about squad expenditure?

The wages paid by Wednesday in these accounts stand at around £33.5m compared to an income of around £28m, which means the club are spending £161 in wages for every £100 that comes in the door.

This is a figure that has stayed in line with the 161% wage to income expenditure posted the year before, though this would have dropped below were it not for the costs of playing behind closed doors for those few matches.

“This is something the club would have to address were it ever to want to come to a ‘break even’ position,” said Maguire.

“Clearly there has been something of a reset at the club, because the costs of the squad have fallen from £26m to £18m between 2019 and the end of the season in 2020.

“Dejphon Chansiri’s investment in players had clearly been reassessed and he was clearly trying to cut back on costs.”

So where does it leave them?

It doesn’t take an expert eye on the club’s accounts to show Wednesday are trying to lower their wage bill, but it does reflect why.

And while the 2019/20 accounts don’t paint a hugely positive picture, those in future should, in theory, read more sustainably given the profile of the players to have left in recent months.

“You couldn’t really have expected a significant improvement in the finances, because the club was locked into that financial commitment to the players. It’s those coming to an end that are the important thing,” he explained.

“A number of those players came out of contract in the summer of 2020 and have done so again this summer, which should significantly drive down the wage bill.

“There is of course the loss of money attached to relegation to League One, including a drop of around £6m in lost TV revenues and a potential drop in gates.”