Sheffield Wednesday in 'operational existence'

The authoritative Swiss Ramble analyses Sheffield Wednesday’s 2020/21 accounts (when they were relegated from the Championship), when their loss slightly increased from £24m to £26m. Revenue fell from £21m to £12m and profit on player sales down from £6m to £1m, offset by £14m reduction in operating expenses

Very few clubs manage to make money in the Championship, but the £25m loss was the fourth worst, only surpassed by Bristol City £38m, Reading £36m and Boro £31m. Just four clubs were profitable, led by two that were recently relegated from the Premier League.

The Owls have consistently lost money, only reporting a profit once in the last decade, and that was only due to one-offs in 2019 (stadium sale £38m plus £6.5m settlement agreement). The club has lost £87m in the last five years (£125m excluding the stadium sale).

Revenue falls

Revenue has fallen by £11.1m (49%) in the last two years from the pre-pandemic level of £22.8m to £11.6m. The 2018 peak of £25.2m was inflated by the accounting period being extended to 14 months, as the club attempted to include the stadium sale.    Following the steep decrease, the £11.6m revenue was the lowest in the Championship in 2020/21 (though Wycombe did not publish revenue figures in their accounts). This was only around a fifth of those clubs in receipt of the largest parachute payments.

Commercial income fell £2.0m (35%) to £3.8m, the club’s lowest since 2012, though obviously adversely impacted by the pandemic. This was firmly in the bottom half of the Championship, far below the likes of Stoke City £12m, Norwich £8m and Bristol City £8m.

Following relegation, club revenue will have fallen a further £6m, due to the lower TV deal in League One, though this should be offset by higher match day and commercial income, as fans returned to the stadium.

The club did not quantify the adverse impact of COVID-19, though this obviously significantly impacted gate receipts, retail and hospitality revenue with all games played behind closed doors, only partly mitigated by a government grant.

Player sales and purchases

The profit on player sales fell from £6.2m to just £0.6m, as many players were released on free transfers. That was miles below the player trading profits at the three clubs relegated from the Premier League the previous season.

Profit on player sales can improve the bottom line, but this has not really been a big money-spinner at the club. While the 2020 profit of £6.2m was decent, they have made less than £15m profit from this activity in the last 10 years, which is very low.   

They only spent £1.4m on new players in 2021, mainly Josh Windass and Callum Paterson, a similar amount to the previous two seasons, partly due to a soft transfer embargo imposed by EFL for breach of rules.   Initially, Chansiri funded a relatively large outlay in the transfer market, amounting to £37m in three years between 2016 and 2018, though the taps have been turned off since those heady days with less than £4m spent in the last three years.    As a result, the squad cost has slumped from £35m in 2018 to around £2m in 2021, which means, among other things, that there is likely to be little realisable value from the club’s playing assets.

Average attendance (for games played with fans) of 23,752 was fifth highest in the 2019/20 Championship, albeit down 13% from the recent 27,306 peak in 2017. Ticket prices were significantly cut following relegation, as club averaged an impressive 22,470 in the third tier.

Wages and debt

The wage bill fell £9.3m (28%) from £33.5m to £24.3m, as headcount reduced from 283 to 246. This is £18m less than the 2018 £42m peak (14 months), though wages had previously tripled from £13m in 2015. Since these accounts, more high earners have left, so will further drop.    Following the decrease, the £24m wage bill was in the bottom half of the Championship.

The wages to turnover ratio increased from 161% to 209%, badly impacted by COVID revenue reductions. In fairness, the vast majority of clubs in the Championship have unsustainable ratios well above 100% (with six over 200%), but Wednesday were fifth highest (worst).

Gross debt decreased by £2m from £61m to £59m, almost all (£58m) owed to Chansiri with “no set repayment or interest terms”. The debt would have been much higher if Chansiri had not converted £44m into share capital and the former owner had not waived £21m loans.

While Chansiri has kept Sheffield Wednesday “in operational existence” (to quote the auditors), he is also responsible for the club’s relegation. Wednesday were close to bouncing back at the first attempt after reaching the play-offs, but it will be difficult after the recent budget cuts.