Sheffield Wednesday accounts explained Part One: P&S, wages and a positive step

Dr Dan Plumley, Senior Lecturer in Sport Business Management at Sheffield Hallam University, spoke to The Star to deliver his summation of the club’s accounts submitted for the 2021/22 season, which were submitted hours ahead of deadline earlier this week.

They follow scrapes with Profit & Sustainability rules in recent years that lead to the controversial sale of Hillsborough Stadium to a separate company owned by Owls chairman Dejphon Chansiri.

But scaled-back expenditure and increased turnover in the first of their two seasons in League One indicate a more positive outlook going forward.

In part one of our plain-English explainer of the accounts, Dr Plumley details an overall view, where the club sits within P&S regulations and where Wednesday sat among the wage spenders in the 21/22 third tier season.

Part two, detailing the situation surrounding the stadium and Chansiri’s financial outlay to the club as they emerged from the Covid-19 pandemic, can be read HERE.

What’s your overall take on the accounts as a whole and what do they mean for Sheffield Wednesday?

“It’s a step in the right direction, that’s the overall takeaway,” says Dr Plumley. “Turnover is up from the year before - which of course was a Covid year - losses have significantly come down as well - a £25m loss down to £7.3m - so that’s a big positive.

“Another is the wage bill, which has pretty much halved. If you track that across a longer period of time, they are the lowest they’ve been for over a decade. We saw those real spikes in spending on wages when they were really going for promotion to the Premier League.

“That level of wage expenditure was outflipping turnover quite significantly and now you can see that things have gone the other way, tracking about 76% on these accounts. This was necessary given the circumstances of the last couple of years, but it is a step in the right direction.

“In terms of turnover there are a couple of things to point out, firstly that it is a very high turnover figure for a League One club. The average in that league tends to be about £6m, so a turnover of £16m shows the power of the fanbase in that league. They’re a big, big club in that league and you can see that in the figures.”

What does it suggest for the where the club is at going forward?

“It’s difficult to compare to the season before (2020/21) because that was so heavily impacted by Covid,” said Dr Plumley.

“That revenue figure will increase in the Championship as well. We’ll see a new set of accounts relating to the season just gone, their second in League One, but then you’d expect an increase of about £6m or £7m from broadcasting alone just going into the Championship.

“That revenue figure should increase in the next couple of years.

“So there are positives in the revenue figure going up after a heavily impacted year, a good revenue figure for League One, way above the average and a more manageable outlay on wages.

“There is still an obvious reliance on Dejphon Chansiri and you can certainly see this in these accounts. Most of the places the club owe money is to Chansiri and obviously you have the stadium issue thrown in there as well. They would be the two things in the background as a note of caution.”

Where does the club stand in terms of Profit & Sustainability rulings?

This is where things get a little complicated - but it seems to be good news for Wednesday. In simple trms, P&S rules dictate Championship clubs can make an overall loss of no more than £39m on a rolling three-year period or face sanctions.

In not so-simple terms, it is Dr Plumley’s understanding that the EFL has followed the lead of the Premier League in easing rules given the debilitating impact the pandemic had on club finances by taking the two Covid seasons as an average and taking figures from the 2019 accounts as the third included year. Still with us?

There are also kick-backs and Covid allowances made by the EFL that are not yet public knowledge.

The good news headline for Wednesday, Dr Plumley suggests, is that there is no immediate threat of breaching P&S rulings and that scaled-back losses paint a more positive picture going forward.

He said: “If you look at the overall losses, there’s a £7.3m loss in this set of accounts, £25.8m the year before and £24m the year before that. We should be looking at an average in conservative terms with those two, so let’s say £25m across those.

“And there’s the £19.1m profit in 2019, which is obviously linked to the management of the stadium sale.

“It means Wednesday are well in range of the EFL regulations assuming the logic is correct on how the Covid years are calculated and everything suggests it is. Once you track all that across the four years it means the club are absolutely fine against Profit & Sustainability and that they are moving in the right direction.

“You’d hope to see a similar loss figure in the next set of accounts but you’re looking at promotion, any investment in terms of players and getting into wages. That’s a strategic decision but in terms of this window there doesn’t seem to be the lavish spending on transfers and wages that got them into problems.

“It’s something to keep an eye on in the next couple of years.”

Outlay halved, but how heavily were Wednesday spending on wages compared to their League One rivals?

“Common sense dictates that Wednesday would have had one of the biggest wage bills in League One,” said Dr Plumley. “At the very least in the top six in terms of spending on wages, if not top two or top three.

“They may not have spent big on transfer fees, but that doesn’t happen a great deal anyway - there’s always a lot of loans and free transfers.

“You look at Ipswich Town, who spent big in terms of transfers as well as wages, but Wednesday won’t be too far behind that.”