The director presents the strategic report for the period ended 31 July 2020.
Sheffield 2 was incorporated on 21 June 2019. On 28 June 2019 the company acquired the whole of the issued share capital of SWFC Holdings Limited, the parent company of Sheffield Wednesday Football Club Limited.
Turnover for the group for the period was £22.2m with the Covid-19 pandemic impacting the 2019/20 season.
The principal risk facing the group is the performance and divisional status of the Club’s first team. The impact of the Covid-19 pandemic on revenue streams has had a significant impact on financial performance and the return of fans to the stadium is eagerly anticipated as the vaccine programme is rolled out. In light of these risks the group remains dependant on the continued financial support from its shareholder.
The group is regulated by the rules of FIFA, UEFA, The FA and The Football League, the board ensures compliance with the relevant rules and regulations and monitors and considers the impact closely of any potential changes.
Section 172 Companies Act 2006 Statement
Section 172 (1) of the Companies Act 2006 requires the directors of a company to act in the way they each consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard to matters including:
a) The likely consequences of any decision in the long term,
b) The interests of the company’s employees
c) The need to foster the company’s business relationships with suppliers, customers and others.
d) The impact of the company’s operations on the community and environment,
e) The desirability of the company to maintain a reputation for high standards of business conduct, and
f) The need to act fairly between the members of the company.
With respect to this the Board sets the direction of the Club with specific focus on;
1- Maximising of non footballing revenues and the growth of commercial income.
2- Greater use of the Stadium, in conjunction with the Sheffield Wednesday Football Club Community Programme and the population in the local community. Increased usage of the stadium for non matchday events such as the annual WAWAW Fun Day.
3- Working alongside Sheffield Wednesday Football Club Community Programme using the power of football to promote education, participation, health and wellbeing of all members of the community in the City of Sheffield. The successful wider community engagement with the annual Owls in the Park day attended by almost 20,000 supporters which helps many local charities.
On behalf of the board
The director presents his annual report and financial statements for the period ended 31 July 2020.
The results for the period are set out on page 8.
No ordinary dividends were paid. The director does not recommend payment of a further dividend.
The director who held office during the period and up to the date of signature of the financial statements was as follows:
The group's policy is to consult and discuss with employees matters likely to affect employees' interests.
Information about matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group's performance.
BHP LLP were appointed as auditor to the group and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
The Club employed a consultant to carry out an energy assessment in May 2019 which gave recommendations as to how it could reduce its annual energy consumption. A number of recommendations were identified and the Club is looking to implement these over the next couple of years and has to date started an ongoing programme of replacing lighting with LED lamps and sensor lights. Monitoring the temperature at which the under soil pitch heating is used to reduce gas consumption, replacing taps to automatically cut off in the toilets around the stadium while we are also planning to replace the undersoil heating boiler with a more efficient model. Matchday radios are all turned off between matches and all kiosks on the concourses are powered down between matches, including till systems and refrigeration. All waste disposal is separately sorted for the ease of recycling glass, paper and cardboard, food waste and general waste. An annual electric equipment disposal is undertaken to achieve efficient recycling. Waste cooking Oil is collected for recycling. Beer lines are cleaned and put on air to save water consumption as this saves rinsing the lines twice which also helps save on waste. Stadium pitch irrigation requirements are measured by electronic moisture probes and the watering is controlled by computer with moisture readings taken daily.
UK Energy Use 2020
kWh CO2e (tonnes)
Electricity 2,000,000 466
Gas 2,800,000 515
Transport 300,000 8
Total 5,100,000 989
Intensity ratio
Emissions per £1m turnover 46.65
We have followed the 2019 HM Government Environment Reporting Guidelines. We have also used the GHG Reporting Protocol – Corporate Standard and have used the 2019 & 2020 UK Government’s Conversion Factors for Company Reporting. Copies of the conversion factors used are provided in the "UK Gov Carbon Conversion Factors": UK Government carbon conversion factors for reporting spreadsheets available at: https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2020.
We have audited the financial statements of Sheffield 2 Limited (the 'parent company') and its subsidiaries (the 'group') for the period ended 31 July 2020 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard , and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 1. 4 in the financial statements, which indicates that additional funding will be required to enable the company to continue in operational existence. The owner has confirmed that sufficient financial support will be made available to enable the company to meet its obligations as they fall due for a period of not less than 12 months from the date of approval of the financial statements. As stated in note 1. 4 , the director acknowledges that this support is not legally binding, and these conditions, along with other matters as set forth in note 1. 4 , indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The director is responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit :
the information given in the strategic report and the director's r eport for the financial period for which the financial statements are prepared is consistent with the financial statements ; and
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identifie d material misstatements in the strategic report and the director's r eport .
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the director's r esponsibilities s tatement, the director is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the director determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the director is responsible for assessing the parent company ' s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the c ompany has not presented its own profit and loss account and related notes. The c ompany’s loss for the year was £13.
Sheffield 2 Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Hillsborough, Sheffield, S6 1SW.
The group consists of Sheffield 2 Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling , which is the functional currency of the company. Monetary a mounts in these financial statements are rounded to the nearest £000.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues : The disclosure requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b), 11.48(c), 12.26, 12.27, 12.29(a), 12.29(b), and 12.29A;
Section 26 ‘Share based Payment’ : Share based payment arrangements required under FRS 102 paragraphs 26.18(b), 26.19 to 26.21 and 26.23;
Section 33 ‘Related Party Disclosures’ : Compensation for key management personnel .
The consolidated group financial statements consist of the financial statements of the parent company Sheffield 2 Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates .
All financial statements are made up to 31 July 2020 .
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The group's business activities together with factors likely to affect its future development, performance and position are set out in the Directors report.
In considering the appropriateness of the going concern basis for the preparation of the financial statements, the director has considered the working capital requirements of the group for the short, medium and longer term taking account of the impact of the Covid-19 pandemic . In doing so, the director has determined that additional funding will be required to enable the group to continue in operational existence. The owner has confirmed that sufficient financial support will be made available to enable the group to meet its obligations as they fall due for a period of not less than 12 months from the date of approval of the financial statements. The director acknowledges that this support is not legally binding and is dependent on the availability of funding from the owner. Therefore, a material uncertainty exists which may cast doubt over the company's ability to continue as a going concern and, therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.
Nevertheless, after making enquiries and considering the funding requirements of the group , the director is confident that funding will be made available and ha s a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly he continues to adopt the going concern basis in the preparation of the financial statements.
These financial statements cover the period from incorporation on 21 June 2019 to 31 July 2020.
Turnover comprises the value of match receipts and season tickets, less percentage payments to the Football League and Football Association, receipts from the Football League and the Premier League, and other commercial and miscellaneous income except donations, all exclusive of value added tax.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity in vest ments are measured at fair value through profit or loss , except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably , which are recognised at cost less impairment until a reliable measure of fair value becomes available.
I n the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest m ethod unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss , are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future paymen ts discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value th r ough profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease d asset are consumed.
Grants received in relation to the government’s Coronavirus Job Retention Scheme have been recognised within other operating income. The grant is accounted for on the accruals basis once the related payroll return has been submitted.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
Player trading
Player trading comprises amortisation of players' registrations and profits and losses on disposal of players' registrations.
Signing on fees and loyalty bonuses
Signing on fees and loyalty bonuses represent a normal part of the employment cost of the player and as such are accounted for in the year they become payable under the player's contract. Those instalments due in the future on continued service are not provided for but are noted as contingent liabilities.
In the application of the group’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The average monthly number of persons (including directors) employed by the group and company during the period was:
Their aggregate remuneration comprised:
The actual charge for the period can be reconciled to the expected credit for the period based on the profit or loss and the standard rate of tax as follows:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
More information on impairment movements in the period is given in note 10.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 31 July 2020 are as follows:
Included within other debtors is a balance of £45m relating to the proceeds receivable in respect of the sale of Hillsborough Stadium to Sheffield 3 Limited, a company controlled by Mr D Chansiri.
Included within other creditors is a balance of £ 3,033,235 for which Mr D Chansiri and Sheffield 3 Limited, a company controlled by Mr D Chansiri, have acted as guarantors.
The loan from the controlling party has no set repayment or interest terms. In the opinion of the director there would be no benefit in calculating a theoretical carrying value at amortised cost as required by FRS 102. The balance continues therefore to be carried at transaction price.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
On 28 June 2019 the group acquired 100 percent of the issued capital of SWFC Holdings Limited, which in turn owns 100 percent of the issued capital of Sheffield Wednesday Football Club Limited.
Player related matters
No provision is included in the financial statements for signing-on fees and loyalty bonuses, as at 31 Jul
y
2020, of £1,953,000 which would become due to certain players if they are still
in the service of the Club on specific future dates.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The lease payments disclosed principally relate to the lease of Hillsborough Stadium. Whilst no rent is payable in the first year of the lease agreement, the rent-free period has been spread over the term of the lease in accordance with the requirements of FRS 102.
Mr D Chansiri is a director of Sheffield Wednesday Football Club Community Programme. During the year
Sheffield Wednesday Football Club Limited
recharged amounts to SWFC Community Programme for expenses incurred on their behalf.
Mr D Chansiri is also the owner and a director of Elev8 Energy Drink Limited, Elev8 Clothing Limited, D
Performance Limited and Sheffield 3 Limited.
Income of £1,550,000 and costs of £3,182,201 were recognised in these financial statements from
transactions with these related parties.
At the year end there were no amounts owed to or by these related parties.
The operating lease commitments in respect of the stadium lease due to Sheffield 3 Limited are disclosed
in note 2
5
to the accounts.
There are no other related party transactions to disclose.
Certain ex-employees of Sheffield Wednesday Football Club Limited are members of the closed Football league Limited Pension and Life Assurance Scheme, a defined benefit scheme. As the company is one of a number of participating employers in the scheme, it is not possible to accurately identify any actuarial surplus or deficit. However under Section 75 of the Pensions Act 1995, the Company, as a participating employer in the scheme, is liable to fund the deficit relating to Company ex-employees who are members of the scheme.
The liability calculated by the Trustees at 1 September 2017 and allocated to the Company amounted to £92,971. The balance estimated as outstanding is included in accruals. The assets of the scheme are held separately from those of the Company.