Sheffield Wednesday Accounts to end May 2017

In what could be considered a major wakeup call to Leeds United fans, the latest Sheffield Wednesday accounts reveal the “eye-watering” amount of money that Sheffield Wednesday owner Dejphon Chansiri has used to prop up the club over the last two years.

In addition to the money already spent, the Sheffield Wednesday directors reveal that, for their club to continue to trade, even more money is needed and the only reason that they are not in administration now is that Chansiri has said he will put more cash in.

The directors’ report says:

In considering the appropriateness of the going concern basis for the preparation of the financial statements, the directors have considered the working capital requirements of the Company …

… In doing so, the directors have determined that additional funding will be required to enable the Company to continue in operational existence.

The report goes on to say that Chansiri has said he will support the club financially for the current season, however the directors acknowledge that this support is not legally binding and is dependant upon the owner having the funds available. It concludes:

… a material uncertainty exists which may cast significant doubt over the company’s ability to continue as a going concern…

So how much money has Chansiri spent?

In addition to buying the club initially and other associated initial costs Chansiri has, over just the last two full seasons, had to inject funds amounting to £37.5 million in cash just to keep the club afloat – he put the money in via loans, new share capital and sponsoring the shirts etc. himself.

How much he has had to spend this season is presently unknown, but it seems likely that it will be a significant sum.

How does this lie with Financial Fair Play (FFP) ?

The short answer is “badly”.

Chansiri admitted in a meeting with supporters that the club was in trouble with FFP and was discussing this season’s finances with the EFL; he expected to avoid sanctions this year although next season was a concern. Twitter users @ploehmann and @KieranMaguire have looked into these financial accounts more deeply and conclude that Sheffield Wednesday may just squeeze under the FFP limits this season but they will have to “sell, sell, sell” major players over the summer to avoid problems next season.

Why have Wednesday got into this trouble?

I’m sure the reasons are many and varied, and some fault lies at the feet of the EFL’s financial model for the Championship, but the over-riding reason is they have ignored basic business principles and spent much more than they are earning in turnover income.

Sheffield Wednesday’s income for last season was £23.3 million yet they spent £37.5 million on club operating expenses of which almost £30 million was on wages alone.

They then spent another £11.5 million buying new players.

Why does this matter to Leeds United fans?

Older Leeds fans know only too well the effects of a club overspending and how it can affect our future for many years to come. Leeds are in the more fortunate position of having a slightly larger, and arguably more loyal, fan base which brings in a higher income than Wednesday achieve; we’ve also been through a period of cost-cutting with Cellino that has helped in this regard too.

However, both we fans and the club want to compete at the top of the Championship and we know that there are clubs in the Championship with owners willing to throw good money away as well as clubs benefitting from EPL parachute payments.

To compete with these clubs, we have two choices:

– We ask Radrizzani to follow in Chansiri’s footsteps at a risk of failing and falling like Wednesday are currently

– We look to increase the club’s income

For a club in the Championship without parachute payments, the major income comes from the fans. Leeds’s accounts will be out shortly and we’ll see then just how we compare with Wednesday, but one thing we do know is that gate income is dependent upon both attendance numbers and ticket prices.

It is easy to make the claim that the club should reduce ticket prices and more fans will come, but does that actually help increase turnover? The club’s experience under GFH, if I remember correctly, was “no it doesn’t” – GFH saw falling gates at the club and reduced ticket prices but the overall gate income didn’t increase to compensate.

The only real way for the club to fill the stadium is for the football to be good and the team achieve results that move us up the table. To fund that without jeopardising our future and “doing a Wednesday” means ticket income must be significant and is the reason why it is hard to justify a fall in prices.

Of course, every scrap of income that the club gets must be spent wisely and it is unlikely that Radrizzani will be able to avoid injecting modest amounts of cash but, in my opinion, for Leeds United to progress it is unlikely ticket prices can fall.