Yahoo News Football finance expert explains what Swansea City's huge losses actually mean for club
The headlines around Swansea City's accounts will at best spark unease, at worst outright alarm.
The financial reality since relegation from the Premier League has, to put it mildly, been a hugely challenging adjustment for the club, and these latest accounts haven't exactly pointed to the possibility that there might be light at the end of the tunnel.
For many, the £17.9m loss, up from the £13m recorded for the year before, can't be dressed up as anything other than a point of profound worry. The latest numbers mean that on average, the club is losing £344k per week.
READ MORE: The full list of winners from Swansea City's end-of-season awards night
In isolation, the concern feels warranted. But in the grand scheme of things, and in comparison to the rest of the Championship, it all feels a bit, well, meh.
As football finance expert Kieran Maguire explains, losses are now part and parcel of life in the second tier.
"My observation is that if you want to be reasonably competitive in the Championship then you've got to accept that you're going to lose money," he told WalesOnline.
"The average losses in that division are £400k a week. Swansea don't get a lot of money coming through the turnstiles and they have to work harder in order to be competitive.
"Parachute payments ended two seasons ago, but they've still got practically got the same level of wages that they did in their final season of parachute payments. As a result of that they're spending a lot more money on wages than what they've got coming into the club."
Swansea's situation is the tip of a wider iceberg some fear might actually end up torpedoing the EFL. It's no coincidence that the ongoing wrestle with the Premier League over a new financial package was referenced in this latest set of accounts.
But just because this is all normal now, does it mean that any resulting concern is misplaced? That's a question that goes well beyond Swansea right now.
Many will instead focus in on the club's own affairs, and the perceived poor decisions that have been made in recent years, which are now likely to be in sharper focus on the back of these numbers. After all, when funds are tight, the consequences of bad decisions carry far greater weight.
But while some might use this as ammunition to aim at the American owners, this latest set of accounts has only cemented what we probably already knew anyway. The current ownership isn't going anywhere any time soon.
Indeed, one of the biggest takeaways here is the club's increasing reliance on the current regime. Despite the mistakes, they are undeniably keeping the club afloat.
The club's ownership group have ploughed in just over £20m since last summer, a move many feel was made to simply keep up with running costs. Some may feel the financial challenges have been at least partially of their own making.
But regardless of the reasoning, such investment, Maguire argues, isn't all that extraordinary at this level.
"The club is sustainable until it's not sustainable," he says. "The owners either say to themselves 'This is really daft. We're having to put money into the club', or their circumstances change. We've seen that in respect in terms of some other owners. That's when things can tip over and get quite unpleasant.
"But that's a risk with any club. We saw what happened with (Roman) Abramovich at Chelsea. They were effectively on life support for a few months as they looked for new owners.
"It's a very high-risk environment and industry in which to operate, and there's nothing that strikes me as unduly worrying about Swansea's accounts apart from the fact they are making losses. But they're in such good company on that front.
"Bristol City's owners, for example, have been investing around £20m a year for the best part of the last decade.
"What you hope for is getting a good coach, a couple of decent signings, some decent loans, and you can become the next Luton Town, or the next Sheffield United, and get yourselves into the Premier League on the back of that.
"But it's a casino condition you're operating in, where everybody's saying that if you get promoted to the Premier League you're going to see all of the riches, and are therefore willing to pay an awful lot of money for that lottery ticket in the Championship.
"But no matter how much money your owner spends, only three clubs can be promoted. As you see this season, the three clubs that came down were all pretty powerful, and the rest are effectively hunting for scraps. Fair play to Ipswich Town, but the likes of Leicester City have players being paid £100k a week playing in the Championship, whereas Swansea City, by my numbers, are paying players maybe around £10k-£12k a week."
The increasingly ambitious efforts to bridge the ever-widening gap between the league's haves and have nots feels like a key driver behind the latest figures. Clubs are eagerly shoving their chips into the centre of the table in the hope of the big pay out of Premier League stardom, while at the same time entertaining an increasingly blase attitude to the potential risks.
As it turns out, even those at the top are playing fast and loose with their cash.
Indeed, Leicester's successful bid for a Premier League has come on the back of losses of nearly £90m, and they are now facing charges relating to profit and sustainability rules.
Their example has perhaps focused minds on balance sheets across the league, a point Swansea's hierarchy seem acutely aware of. Certainly the Swans were quick to stress in their latest accounts they were still operating within the rules, while chairman Andy Coleman was similarly keen to reassure supporters during the latest fans' forum.
Having seen losses hover around £30m over the last two years, there is some concern Swansea are dangerously close to the threshold of punishment. However, Maguire doesn't believe there's any immediate cause for alarm.
"Under the rules, clubs are allowed to lose £39m over three years, but what you're doing first of all is exclude any infrastructure costs," he explains. "The stadium's still a relatively new stadium. There's infrastructure costs there and in the academy.
"For example, running a category 2 academy, you're probably looking at £1.5m to £2m a year, which over three years is about £5m, which you can add back into the equation. If they've got community schemes or a women's team, you adjust for those as well.
"So the headline figures we see in the accounts are a start point. You then start to tweak those for these allowances.
"Based on the accounts, Swansea have lost £36m over the last three years, but you then when taking away your infrastructure costs, which based on my figures are around £4m, that then becomes £32m.
"You've probably then got another £5m for academy costs. Then with community costs and the women's team on top of that, I think their PSR losses are probably in the region of £25m-£26m, which means they've got a fair degree of flexibility as far as the next couple of transfer windows are concerned.
"Fans often fall into the trap that it's a good thing to be at the limit. Fans often say that if you're not at the limit or close to the limit then it's a sign of a lack of ambition. But it tends to be a sign of either not having the money to fund those losses, or trying to operate a more sustainable model."
'Sustainable model' has been a heavily-used catchphrase from the ownership for some time, but has also coincided with a gradual declined in on-the-pitch fortunes.
Swansea are about to sign off on their worst season since relegation from the top flight this weekend, and sympathy from supporters is likely to be wearing thin. After all, a healthy balance sheet isn't exactly what gets people clicking through the turnstiles.
"Fans want to be bestowed with big glittery baubles in the form of expensive footballers," Maguire continues. "We've become conditioned to believe that spending more equals spending better."
The overriding point heading into the summer is obvious. Decision-making has to be razor sharp in its effectiveness. There's simply no room for error now, particularly in the transfer market.
In fairness, many supporters understand this point. It's for that reason the lack of value from the likes of Mykola Kuharevich and Nathan Tjoe-a-On has been so persistently highlighted over the last few months. Cash can't be squandered. Every penny counts.
The point feels even more pronounced given there isn't anywhere near the same level of financial opportunity within this squad. Over the years, the club have duly plugged holes in the balance sheet by selling the family silver piece by piece.
Oli McBurnie, Daniel James, Joe Rodon, Flynn Downes and Joel Piroe have all been flogged for sizeable sums in recent years.
Now, the cupboard is looking comparatively bare. Nathan Wood was the subject of a £10m bid from Southampton last summer, and is perhaps the standout candidate now, but it seems unlikely the club will be able to command the sort of money mentioned previously.
Besides, relying on cashing in on your best players isn't a viable model for long-term financial stability.
"Swansea have had a very good player trading model historically," says Maguire.
"If you keep selling your best assets that has an impact on the pitch and the average level of wages tends to decrease over time as you become more embedded into the Championship in terms of what can be paid out in wages, which then has an impact on what players you can attract and then sell on.
"So I think the club has done as well as could be expected in terms of player sales.
"But it's a bit like panning for gold, you can go a long time, maybe two or three windows without a sale, and if you become dependent on a sale, it's a high-risk strategy."
In total, 10 players are currently set to leave the club at the end of the season, although a few of those may yet end up staying.
But regardless of what happens on that front, it's clear the Swans will have to get creative in this upcoming window.
