The accounts of football clubs can be a minefield.
So we asked football finance expert Keiran Maguire, of the Price of Football podcast, for a whirlwind Q&A on all things Wednesday after the club finally released their long overdue 2018/19 accounts.
So, what’s the general picture for Sheffield Wednesday?
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It’s still really tough for Sheffield Wednesday, competing in the Championship. The club was losing over half a million pounds a week in terms of day-to-day activities.
The sale of Hillsborough has been switched to the 2019 accounts which is going to help and there’s this mysterious £6.5m compensation that a lot of people are linking to Steve Bruce leaving the club and clearly that’s beneficial, but those are one-offs and when we look into 2020; no matchday income, it’s harder to get commercial income with matches taking place behind closed doors, 2020 will be a tough year.
Hopefully the club will have been able to push the wage bill down with players coming out of contract in 2019, there are more coming to the close of their contracts in 2021, but it’s a challenge and the club is still reliant upon the owner to underwrite those losses.
What’s this about the lease agreement on Hillsborough?
There’s a long-term lease as far as the club are concerned. They will be paying rent on the ground for the foreseeable future, so to a certain extent they will be worse off in the accounts in future years because it’s an extra expense.
They booked all of the profit on the sale of the stadium in one year and now going forwards they’re going to have to commit themselves to paying out rent.
Looking at the numbers I think the rent is reasonable, it won’t break the club. But it is stil an ongoing cost. I suspect to a certain extent that will be offset by the money from the landlord, because while the stadium was sold for £60m by the end of 2019, the football club had only received £7.5m from the owners.
It would appear they’re paying £7.5m a year in terms of cash for the period of eight years in total.
Are Wednesday any worse of than anybody else right now? Is their major cause for concern?
I don’t think so. The analogy that I would use is that the club is operating a bit like the ‘Bank of Mum and Dad’, ie they’re digging out of the losses the same way a teenager might go to their dad to ask if they could lend them five grand for a new car. The parent knows they’re lending the money, but realistically they’re never going to see it again.
Dejphon Chansiri has continued to put money into the club on a long-term basis and without him the losses would be unsustainable, but then without him the wage bill wouldn’t have tripled. It’s gone from around £13m per year to £36m. He’s sanctioned that extra spending as far as wages are concerned.
If a new owner had come in or the club had never met Mr Chansiri then the losses would have been lower because previous owners took a far more cautious approach to the club’s finances. Whilst the club was losing money under the prior regime, it was in the region of between £3m and £5m per year as opposed to double or treble that as we’re seeing now.
Are other clubs ‘spending at the Bank of Mum and Dad’?
Derby, Forest, Radrizzani at Leeds before they went up, they’re all digging their hands in their pockets on a regular basis to fund the losses of the club with the hope that they’re going to pick up the golden ticket at the end of the season in the form of promotion to the Premier League, either by promotion of via the playoffs.
The clubs in the Championship overall had day-to-day losses of over £600m in 2019, so Sheffield Wednesday are not alone in that environment. How the Championship is going to long-term convert itself into a sustainable division, nobody seems to have an answer for that because there’s a reluctance to grab the nettle in terms of costs that are not sustainable.
In nine years out of the last 10, wages have outstripped revenue. From a business point of view, it’s a really tough environment.
Any FFP issues?
We’re not quite certain in terms of FFP, given the fact that Wednesday had a points deduction. Does that mean that we disregard the figures for 2017 and 2018 and we effectively start afresh with the 2019 accounts.
If that is the case then actually Sheffield Wednesday are in a relatively strong position, because now that the profits from the sale of Hillsborough have gone into the accounts, plus this £6.5m which some are linking to Steve Bruce, together that spells good news for Sheffield Wednesday.
My gut reaction is from an FFP perspective they’re in a stronger position than most clubs. But we don’t know how the league is gong to handle their losses in 2017 and 2018.
What about playing expenditure?
The club has clearly retrenched from where it was in the first three years of Dejphon Chansiri’s regime, they spent £36m over three years on new players and didn’t have sgnificant sales. Then we get to 2019 and it’s £1.1m.
It’s either due to FFP concerns or the owners turning around to the manager and saying ‘I’ve given you plenty of support, it’s time for a re-think’.
Going forwards, we’re not going to be seeing the club spending the sort of money that we did see in the early years of Mr Chansiri’s regime at the club.