Just 2 seasons ago, Wolverhampton Wanderers were preparing
for their third season in the Premier League after finishing a very
credible 15th the season before. Today, they are beginning their first
season in the third tier of English football after a dismal relegation
from the Championship last year.
In 2007, Wolves owner Sir Jack Hayward relinquished control
of his beloved club and sold it to property developer Steve Morgan for
the nominal fee of £10. Morgan, the owner of Redrow Homes who once made
an audacious attempt to buy Liverpool FC, promised that he would
initially invest up to £30 million in the club "over a period of time
... to help re-establish Wolves as a Premiership club. "
At the start of the 2011/12 season Wolves fans had every
right to be buoyant. The club was financially secure, they were
preparing to invest and upgrade their Molineux stadium and they had
managed to retain their core players which had performed so well the
season before.
But like many before them, Wolves failed to maintain
their level of performance and were in the relegation zone for the
majority of the season. Midway through the season the Chief Executive,
Jez Moxey, announced that the club had made a £9m profit the season
before. Many fans were in uproar claiming that these funds should be
reinvested back in the squad to try fight their way out of the
relegation zone. They were not. And Wolves were relegated without much
of a fight.
At the start of last year, back in the Championship, Wolves
were expected to fight for promotion with many eyeing them up as
possible winners. Indeed Sky Bet had them listed as third favourites
offering the odds of 8/1 that they would be automatically promoted.
Things did not go to plan. The new manager, the rather
unknown Stale Solbakken from Norway who took over from Mick McCarthy,
was relieved from his position in early January after being knocked out
of the FA Cup by non-league Luton and the team lying 18th in the league.
The Wolves board pondered their next appointment carefully knowing that
it was probably one of the biggest decisions they would have to make.
Highly-rated Dean Saunders, manager of promotion chasing
League 1 side Doncaster Rovers, was charged with the responsibility of
saving the historic club. Like Solbakken before him, Saunders struggled
to get the side to work for him and the club continued to struggle in
the league. Wolves were relegated and banished to League 1, Baggies fans
jumped in joy and Saunders was quickly sacked after just 20 games in
charge. Karl Henry, boyhood supporter and club captain, summed the
situation up pretty accurately calling it a "sorry state of affairs".
The Wolves Board and Steve Morgan have continued to take
flack all off-season as they struggle to offload some of the residual
high earning players from their brief stint in the Premier League. With
the sudden demise of the historic club it is likely that it will impact
the club's finances and, ultimately, affect their ability to climb out
of League 1.
So, after back-to-back relegations and investing
significant sums in their infrastructure & players, how are Wolves
fairing financially?
Wolves report their financial statements on a yearly basis
starting every June. Therefore, the 2012 financial statements represent
their final year in the Premier League and their 2013 statements (the
year in the Championship) have not yet been released.
Overall, Wolves' financial statements are quite impressive.
During their 3 season stint in the EPL they managed to bank profits
totalling £13.5m, satisfy their outstanding loan of ~ £3m, and accrue
just over £12.8m in cash reserves. In fact Wolves were the 5th most
profitable club in the EPL in the year 11/12.
The financial benefits of playing in the EPL are evidently
clear - in 09/10 turnover surged to just over £60m - a whopping increase
of over 300%. This is due to the central broadcasting deal and the
£2.1bn TV rights that the league generates. The club also signed a new
sponsorship deal with SportingBet which is largely responsible for the
£2.2m increase in commercial revenue. Wolves' revenue increases are offset in part by their
activity in the transfer market (player amortisation increases from
£3.7m to £9.5m) and the subsequent increase in wages (£16.7m to £29.8m).
As a form of 'relegation compensation' Wolves will receive
£48m over 4 years from the EPL. Also known as the parachute payment,
many Football League clubs have attacked the practice of paying huge
sums to clubs as they argue it gives the relegated clubs an unfair
advantage and effectively rewards failure in the EPL. Wolves will have
received £16m last season and will receive a further £16m this season,
despite being in League 1.
In March, in an attempt to curb excessive spending and the
loss-making culture of many clubs, the Football League agreed to cap
aggregate wages to 60% of the club's revenue. Even though Wolves will be
receiving their second parachute payment of £16m they will not be
allowed to consider this as revenue when calculating their wage cap
limit because it is considered an 'exceptional item'.
If Wolves want to avoid sanctions they will need to
severely cut their wage bill. Many of the players at the club are still
collecting Premier League wages and a few media articles have estimated
their wage bill for the 2012/13 season was approximately £5m. As a point
of reference, the team who wins League 1 gets just £25,000 in prize
money.
The importance of the upcoming season cannot be downplayed. Wolves fans will be expecting promotion and the owners cannot afford to stay in League 1 for more than one season. Some of more the more senior players will need to stand tall and help some of the youngsters settle into the pace of League 1.
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