As the final whistle blew at Pride Park on May 8, confirming Sheffield Wednesday’s relegation to League One, it was worth a moment of reflection in Berkshire. In an alternate reality, that was Reading going down.
After a seventh-place finish - their highest in four years - the third tier might seem safely further away than it has for a while for the Royals, but it would be naive to ignore the problems that exist at the club - problems similar to those that have dogged Wednesday in recent times and ultimately led to their relegation.
If you strip back the different histories of the two clubs and their contrasting on-field fortunes over the last eight months, Sheffield Wednesday and Reading - beaten Championship playoff finalists in 2016 and 2017 respectively - are remarkably alike.
The parallels stem from the boardroom, where Dai Yongge has owned the Royals since 2017 and Dejphon Chansiri the Owls since 2015. Chansiri is closely associated to Narin Niruttinanon, who remains a company director at the Madejski Stadium, having previously been the club’s biggest shareholder and one third of the Thai consortium that owned the club for three years. Chansiri and Niruttinanon’s fathers founded and still own the multi-billion-pound Thai Union Group, the world’s largest producer of canned and frozen tuna.
The Niruttinanon link is where the connection between Chansiri and Dai ends. The most interesting thing is the similarity between how they run their football clubs.
Upon their respective takeovers, the aim for both was to get to the Premier League as soon as possible. Chansiri stated this outright, saying he wanted top-flight football at Hillsborough within two years, to celebrate the club’s 150th anniversary. This is where he differs to Dai in that he is comparatively open with supporters through club statements and media interviews. Reading’s owner has never spoken to journalists and his name is rarely put on press releases, but his actions speak for themselves and there is no doubting his insatiable appetite for promotion.
Chansiri and Dai both spent big in their first couple of years in England to try to reach the promised land. Wednesday signed Jordan Rhodes (£10 million), Adam Reach (£5 million) and Almen Abdi (£4 million); Reading brought in Sone Aluko (£7 million), George Puscas (£6 million) and Lucas Joao (£5 million). The wages paid by both clubs have also been among the highest in the division in the last few seasons.
Yet in both Yorkshire and Berkshire, supporters will have questioned quite how much value they got for their money. Take Rhodes and Aluko, who have averaged £0.67m per goal and £1.17m per goal respectively in the Championship over the last four years.
The Owls competed in the playoffs in Chansiri’s first two full seasons in the charge, but then slipped down the table and finished 15th, 12th and 16th before relegation to League One in 2020/21. Dai’s first summer at Reading came off the back of defeat to Huddersfield Town at Wembley, but then the club finished 20th two years in a row, only avoiding relegation on the final day of 2017/18. Money had been spent, and for that you cannot fault the two owners’ commitment, but it had not been spent wisely.
That comes from mismanagement and a lack of structure behind the scenes. Chansiri formed a relationship with agency Doyen Sports early in his tenure and built a now-abolished ‘transfer committee’, but they have no director of football and there has been no chief executive at Hillsborough since February 2019.
It has been similarly chaotic at the Madejski Stadium. Like Chansiri, Dai has reportedly relied on the expertise of a so-called ‘super agent’, Kia Joorabchian, to help with transfers and this has produced mixed results. One of Dai’s first acts at Reading was to appoint Ron Gourlay as CEO, but the Scot appeared to tear apart any foundations the club had behind the scenes with regards to recruitment and financial planning, while many long-standing staff left under his watch. Nigel Howe returned to the position when Gourlay stepped down in December 2018, before Dayong Pang - a close associate of Dai - was placed in the role last summer.
The director of football position has been equally volatile. Brian Tevreden was manning the ship at the time of Dai’s arrival, but his relationship with Gourlay was not a happy one and he departed just over a year later. Gianluca Nani, formerly of West Ham United and Watford, spent a forgettable three months in the hot seat in late 2018. The position was unoccupied until Mark Bowen took the role the following summer, but he too quickly vacated by stepping up to be first-team manager following the sacking of Jose Gomes. After an unsuccessful attempt to hire Alexandre Mattos in early 2020, Bowen declined to move back upstairs when he himself was replaced by Veljko Paunovic last year.
It is hardly surprising that such turbulence in the boardroom has led to an accelerated turnaround in managers. Reading have had five permanent bosses since the start of the 2017/18 season while Wednesday have had six. The majority of these appointments have been at best misguided, with both clubs enduring managers who have had the lowest win rates in their respective histories: Paul Clement and Tony Pulis.
Spending substantial money can be justified if you’re also able to bring funds in, but Reading and Wednesday have been among the worst clubs in the Championship for selling players in recent years. The Owls have received just £8 million of transfer fees for their players in the last six seasons and the majority of that is courtesy of Lucas Joao’s move to the Madejski Stadium.
Reading have been slightly better and received £23 million from player sales since 2015, but since Dai has come in that figure is only £9 million. Both owners are known to generally be stubborn in negotiations and reluctant to let players leave. As a result, the clubs have missed out on vital income and players have left for nothing at the end of their contracts.
A former Sheffield Wednesday player told The Athletic: “There were opportunities for some people to leave, but the chairman [Chansiri] didn’t like people leaving. He made it difficult for them to leave. He’d move the goalposts last minute on a deal. One lad who wanted to go had to track the chairman down in a hotel and ask to leave. He forced it through in the end.”
That testimony could easily have also come from inside the Reading camp. Think of the eight-figure fee Brighton and Hove Albion bid for wantaway Liam Moore in 2018 - that Dai blocked before instead handing the defender a bumper new contract - or his refusal to entertain bids from Sheffield United for John Swift last summer. He pulled the plug in the eleventh hour on Danny Loader’s proposed move to Wolves in 2019 before the teenager left on a free 10 months later.
Being unable or simply unwilling to generate funds from player sales is an unsustainable business model, but promotion to the Premier League, and the money it brings, is seen as the golden egg to cover all costs. Therefore the risk, in the eyes of owners, is worth it. But for Reading and Wednesday, it has not paid off and led to a constant battle with profitability and sustainability rules.
Under those rules, teams are allowed to lose £39 million (pre-tax) across three seasons. So in order to try to offset losses and comply with the regulations, the two clubs both sold their stadiums in 2019 to other companies controlled by Chansiri and Dai. The Royals sold the Madejski Stadium to Renhe Sports Management for £26.5 million and the Owls sold Hillsborough to Sheffield 3 for £60 million.
This got the Yorkshire side into hot water with the EFL as they backdated the sale to be included in their 2017/18 accounts, allowing them to present a three-year profit. Without the revenue generated from the stadium sale, they would have made a pre-tax loss of around £57 million, breaching the profitability and sustainability rules. As a result, they were fined 12 points ahead of 2020/21, which was later halved to six. Nonetheless, the deduction ultimately cost them their Championship status as they were relegated by three points.
But how close are Reading to following in Wednesday’s footsteps and what can the club do to avoid suffering the same fate?
Firstly, that threat of a points deduction. The sale of the Madejski Stadium seems to have been permitted without any repercussions; although slightly unusual, Reading broke no rules as the stadium was fairly priced and submitted as part of the correct year’s accounts.
The more pressing concern is the club’s blatant flouting of profitability and sustainability regulations. Reading’s latest accounts showed that they lost £42 million in 2019/20 alone, giving them a pre-tax loss of an eye-watering £93 million across three years - almost two and a half times the permitted loss. There has never been more justification to punish the Royals.
However, the club may be given a brief reprieve. On The Tilehurst End Podcast last month, football finance expert Kieran Maguire suggested that points deductions in the EFL may be unlikely this year and teams will be given another 12 months to get their houses in order:
“The thing that Reading have got in their favour is that I don’t think there is any desire from the clubs in the EFL for their fellow clubs to end up with points deductions. We could end up with eight or nine clubs being on the end of points deductions, which means from a sporting integrity perspective, it would make a nonsense of 2021/22 as a season.
“I suspect there won’t be any profitability and sustainability points deductions for the forthcoming season. What the EFL will probably do is assess clubs over two years. Take the losses in 2021 and take the losses in 2022, halve them and use that as the basis for the three-year assessment. So things will be really challenging in 12 months’ time.”
It seems almost impossible that Reading will be able to comply with the rules by this time next year, but they can at least show a willingness to do so and continue with the cost-cutting measures that the EFL have wanted them to carry out.
The signs over the last year have been promising, in terms of recruitment at least, as the club have stripped back their spending. Ovie Ejaria (£3.5 million) is the only player to arrive at the club for a fee since the summer of 2019 and Reading were the only side in the Championship to not sign anyone in the January transfer window. Player of the season Josh Laurent has been proof that free transfers can be gems and that sort of deal should be replicated this summer.
There has also been a trust in the academy to fill places in the squad where new signings cannot. Michael Olise, Omar Richards, Tom Holmes and Tom McIntyre all played in at least half of Reading’s Championship games and did not look out of place; the first three were all nominated for TTE’s player of the season award. Under-23 players have taken regular spots on the bench and there is hope that the development of those such as Dejan Tetek and Femi Azeez continues into 2021/22.
One area where Reading simply have to improve is selling players. Money has to start coming into the football club and flogging those on the pitch is the most effective way of doing that. There’s no denying that Reading have several valuable assets - Michael Olise, Lucas Joao and John Swift would probably garner the most cash - so Dai Yongge needs to bite the bullet and let at least one leave.
As for the director of football position, STAR’s structured dialogue meeting with the club on April 1 revealed that a four-man ‘Football Board’ is now in place instead - comprising of Dayong Pang, Bryan Stabler, Michael Gilkes and Veljko Paunovic.
This structure is promising. Stabler (finance director) and Pang (CEO) both have financial backgrounds, complementing the football expertise of Gilkes (academy manager) and Paunovic (first-team manager). To go back to a financial perspective, it also saves money by not hiring someone else to fill the DoF role. Time will tell if it is a decision that works out.
Finally, the state of affairs in the dugout. Paunovic is the first Reading manager to last a whole season in the job since Jaap Stam in 2016/17, again pointing to an improving sense of stability. While there are murmurs of discontent after the Royals threw away their place in the playoffs, it would seem absurd and counterproductive to sack him after a season of progress.
The Serbian is not perfect, but no alternative manager who Reading could attract is. He appreciates the constraints the club are under, has an ambition for a long-term project, is a good man-manager and is willing to bring through young players. As someone to build a vision around, the club could do a lot worse. Constantly changing managers - unless you are Watford - very rarely leads to sustained success.
It is very easy to say all this and simply sum it up by writing ‘don’t follow the example of the relegated club’, but the business models of Reading and Sheffield Wednesday have been worryingly similar over the last few years. The good news is that the Royals do appear to be moving in the right direction in terms of cost-cutting, boardroom structure and, most importantly, results on the pitch. There is still a hefty way to go, but they’re on the right track.
There will perhaps always be the worry that Dai Yongge, driven by his thirst to get to the Premier League, will go rogue and throw all of this into chaos again. But hopefully he has learnt a lot in the last four years and maybe even glanced over at the situation at Hillsborough to see what there is to lose if such yearning for the top flight is channelled in the wrong way.
All transfer fees obtained from Transfermarkt.co.uk
All club financial information via Companies House