Sheffield Wednesday recently released their latest accounts, for the year ending May 31 2017, and they do not make pretty reading at all. The question is, does the increased loss have to necessarily lead to a sense of doom for fans of the Owls?
Perhaps the figure that doesn’t make pretty reading is the headline loss for Wednesday of nearly £20.8 million loss, a rise of £11.1 million from 2016 (£9.7 million loss) – in other words a 114.43% increase in losses made.
Making up the bulk of this rise of £11.1 million loss was a rise of £8.84 million in wages/salaries and a further rise of £1.25 million in social security/National Insurance contributions – this combined increase topping out at just over £10 million (£10,090,000). The number of employees jumped in number over the year from 225 (2016) to 274 (2017), the above costs coming from that – working out at an average increase of around £206,000 per employee over the course of the year.
When it comes to the day-to-day running of the club, that has been propped up, to a large degree, by a £37.65 million loan that was effective in the accounts ending May 31 2017. This loan was compared to a similar loan in 2016 of £17.68 million – the difference between the two being around the £20 million mark – just shy of 2017’s total losses.
More worrying, in a way, is some of the wording of the report by auditors BHP in note 1.2 on page 18 entitled ‘Going concern’. In this section the auditors state “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 note (note 1.2, page 18) continues stating that club owner Dephon Chansiri has said that he will provide such funding, but then states that this promised provision is not legally binding. This leads the auditor to then state “a material uncertainty exists which may cast significant doubt over the company’s ability to continue as a going concern and, therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business.”
On the football side of things, what is worrying many fans is the issue commonly referred to as FPP and especially the ‘Profit and Sustainability’ rules that came in to the Championship during the 2016/17 campaign. The key point here is that any Championship side is able to lose no more than £39 million over a three-season span, so an average of £13 million loss per season.
If you look at Sheffield Wednesday since the 2016/17 campaign, when these rules were first introduced, the Owls have made a combined, two-season loss of a figure around the £30.385 million mark, leaving the Owls only an £8.615 million cushion before falling foul of FFP regulations and an impending transfer embargo and possible points deduction, even relegation in severe cases.
Whilst the £11.1 million increase in losses might not spell impending doom for Wednesday, or their fans, it does highlight a serious situation that could be bubbling under the surface at Hillsborough. It will take drastic cuts, even high-end player sales possibly, to fit under FFP for next year. The thing is, an owner can only inject £8 million per year to cover losses under the ‘average £13 million a year’ scenario and should Chansiri do that this time around then it’s pushing the Owls close to the precipice of failing FFP regulations.