Reading's daire finances

These are tough times if you’re a supporter of Reading, as the club has once again been charged with “multiple breaches” of EFL regulations, including failure to pay wages on time on three occasions (October 2022. November 2022 and 2023) and the non-payment of tax to HMRC.

In particular, owner Dai Yongge was personally charged with “causing the club to be in breach of EFL regulations, despite his commitment to fund the cash requirements of the club.”

This raised the possibility of a points deduction for the third season in a row for the Royals. Their first penalty came in 2020/21, when they were deducted 6 points for breaching financial rules, as the EFL said that their FFP loss worked out to £58m for the 3-year monitoring period between 2018 and 2021, which was miles above the £39m limit.

The second strike came in April 2023, when Reading failed to adhere to the terms of the business plan agreed with the FL, thus triggering a suspended 6-point penalty in 2021/22. The club had committed two specific breaches:

Reading have now been under the control of Chinese businessman Dai Yongge (and his sister Dai Xiu Li) for five years, as they own 96% of the club via Renhe Sports Management Co Ltd.  It’s fair to say that the club has been struggling ever since their arrival, so much so that Reading fan groups have recently launched a “Sell Before We Dai” campaign to push for a change in ownership.

Reading have reported losses in eight out of the last ten years, even managing to lose money in the Premier League in 2013.  However, their losses have been particularly high in the five years since Dai arrived, adding up to an amazing £146m in this period.

If you want to take a positive view, their most recent loss of £17m was the smallest under the current owner, but that’s only because the other annual losses are so bad, e.g. £42m in 2019/20 and £36m in 2020/21.

Reading have reported losses in eight out of the last ten years, even managing to lose money in the Premier League in 2013.

However, their losses have been particularly high in the five years since Dai arrived, adding up to an amazing £146m in this period.

If you want to take a positive view, their most recent loss of £17m was the smallest under the current owner, but that’s only because the other annual losses are so bad, e.g. £42m in 2019/20 and £36m in 2020/21.

Reading supporters’ unhappiness with the club’s ownership is highlighted by the average attendance steadily falling, as fans have voted with their feet. Crowds have dropped by around 40% since the season in the Premier League in 2012/13, falling from 23,862 to 14,249.

Reading’s wages fell £6.9m (21%) from £32.2m to £25.3m, which means that these have now dropped three years in succession from £40.7m in 2018/19. This is the club’s lowest wage bill since 2011.  That said, it’s not much lower than the £27.9m they paid out when they last received parachute payments in 2017, which highlights how much the owners have invested (or wasted, depending on your point of view).

Reading’s £25m wage bill was mid-table in the Championship, so relegation meant that they badly under-performed their budget.  Reading’s wages to turnover ratio decreased from a barely credible 234% to 150%. Although this was obviously an improvement, reflecting the fall in wages, the fact remains that the club has averaged twice as much in wages as income received during Dai’s unsuccessful tenure.

Since the club’s parachute payments stopped five years ago, Reading’s cash has largely come from the owners £144m (loans £100m and share capital £44m), boosted by £27m of asset sales. This was mainly used to cover £143m operating losses, while spending £24m (net) on player purchases. Only £3m was invested in infrastructure in that period.

Under John Madejski Reading had been run on a fairly sustainable basis, though he was sometimes accused of not being ambitious enough. Since he sold up, the club has experienced all sorts of problems with a series of new owners.

It is now abundantly clear that Reading’s gamble on spending their way out of the division backfired. While the owners have provided much financial commitment, their football knowledge has been lacking, not helped by poor advice from others.

This is a club that has posted significant losses, run up large debts, sold its stadium and training ground and faces yet another points deduction for financial irregularities, including late payments to players and the taxman.  Reading will have to cope with another revenue hit in League One, so candidly the future does not look great.