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Wolves 2018/19 accounts: Premier League football helps club move from huge loss into profits

Writer's picture: Andrew ZarbAndrew Zarb

Thanks to Premier League football and a strong performance on the pitch, Wolves improved their fortunes off the pitch and recorded a pre-tax profit.

Wolverhampton Wanderers have announced their accounts for the year ended 31st May 2019, with the 2018/19 season being the club's first back in the Premier League since 2011/12 after winning the Championship title in 2017/18. As a result, the club this year made a pre-tax profit of £19.9m, compared to a pre-tax loss of £57.2m during 2017/18.

Some key performance indicators (KPIs) from their accounts are the following: Revenue As a result of playing in the Premier League, this increased sharply during 2018/19 from £26.4m to £172.4m, an increase of more than six times. The main factor which resulted in this increase in revenue was the fact that broadcasting revenue rose from £7.9m in 2017/18 to £133.3m. Furthermore, match day revenue saw an increase of almost half, from £7.8m in 2017/18 to £11.5m in 2018/19, despite playing four league games fewer, which were partially offset, however, by the fact that Wolves played 3 more FA Cup matches. It is fair to say that this was influenced by the fact that average league attendance increased from 28,298 to 31,030 in the club's first season back in the top flight. Meanwhile, commercial and other revenue almost trebled from £10.5m in 2017/18 to £27.6m in 2018/19, an increase of around £17m. As a result of an impressive first campaign back in the Premier League, whereby Wolves finished in seventh place, the club qualified for the Europa League qualifying rounds for 2019/20 (aided by the fact that Manchester City won both the FA and Carabao Cup last season). In the Europa League, the club have so far advanced to the round of 32, and therefore it is extremely likely that revenue will only increase for the 2019/20 financial year. It is estimated, that, from its Europa League exploits, the club will earn at least around £16m, and this will only increase further if the club continue to progress in the competition, and they could earn up to around £32m were they to win the competition. In addition, due to their Europa League exploits, the club will have played at least 7 more home games, meaning that it is highly likely the club will earn more match day revenue. However, due to the club being eliminated in the FA Cup at the first hurdle this season, compared to making the semi-final last season, the club will see a small drop in their revenue (from FA Cup prize money) of around £2.8m. Due to Europa League matches, combined with a considerable increase in ticket prices, it is not inconceivable that Wolves' match day revenue reaches around the £15m mark for 2019/20. Meanwhile, the Premier League has seen a sharp increase in the deal for overseas TV, which increase will be distributed on the basis of a club's finishing position. If Wolves were to finish in the top half, it is estimated that the club would be rewarded with at least around £129m, which would be a small increase from the amount earned last season (though this is a conservative estimate, and their TV money from the Premier League may well increase further, especially if the club were to finish higher up in the standings). As for commercial revenue, during the summer of 2019, the club signed a new shirt sponsorship deal, with ManBetX replacing W88, which is estimated to earn them a further £3m a year, therefore, it is highly likely that commercial revenue will increase. Therefore, it is reasonable to estimate that the club will see an increase in their revenue to around the £190m mark, which may well increase further and potentially exceed the £200m mark, depending on the club's final performance in both the Premier League and Europa League. Wages As a result of playing Premier League football in 2018/19, wages saw a considerable increase of just under £41.5m, influenced by the fact that the club invested heavily in the playing squad to sign high-quality players, though their wage bill will still be one of the lowest in the top flight at £92.1m and perhaps it is fair to say that their increase in wages is not as high as that of those teams who previously have gained promotion to the Premier League, though the fact that the club had a rather high wage bill of £50.7m in the Championship - so much so that only two clubs had a higher wage bill in the 2017/18 Championship season - may well serve to explain this. Furthermore, number of employees at the club increased from 319 to 365, which also helps explain the increased wage bill. That said, as a result of being in the Premier League which helps significantly boost revenue for clubs compared to being in the Championship, the wages to turnover ratio fell from 192% during the 2017/18 season (meaning that the club was spending almost £2 in wages alone for every £1 earned in revenue), to a very respectable 53% in 2018/19, which will be one of the lowest in the top flight, lower than the likes of Chelsea and Manchester City who have already reported their 2018/19 accounts, whilst comparably clubs such as Everton, West Ham and Brighton (each of whom reported their accounts for 2018/19) had ratios exceeding 70%. For the 2019/20 financial year, it is highly probable, that due to investments in the playing squad, as the club signed the likes of Patrick Cutrone (who was shipped out on loan in January), Jesus Vallejo (whose loan was cut short in January), Pedro Neto, Bruno Jordao, other players for the U23s, coupled with the permanent acquisitions of Raul Jiménez and Leander Dendoncker (though these players' wages may well have been on the club's wage bill in 2018/19). On the basis of players recruited, coupled with the fact that Joao Moutinho signed a new contract extending his stay at the club to 2022, it is not unreasonable to estimate that wages may well reach around the £100m mark, if not very possibly exceed it, for 2019/20.

Amortisation This refers to the depreciation of a player's transfer fee over his contract. During the 2018/19 financial year, Wolves saw an increase of £19.5m in their amortisation, which more than doubled from £13m in 2017/18. This was influenced by the fact that players like Willy Boly and Diogo Jota completed permanent moves to Molineux, whilst the club signed players such as Joao Moutinho, Jonny, Rui Patricio and Adama Traoré, which of course led to a significant increase in amortisation costs. However, Wolves' figure for amortisation of £32.5m is the lowest figure reported by any Premier League club so far. For the 2019/20 season, this figure will definitely increase due to the various signings made in the summer. Raul Jiménez and Leander Dendoncker were signed for a combined transfer fee of roughly £42m, both on four-year contracts, meaning an amortisation cost totalling approximately £10.5m for these two players. Furthermore, Patrick Cutrone signed for a reported £16m on a four-year contract, though only spent half a season as he was shipped out to Fiorentina on loan, and therefore amortisation will likely only be calculated for half a season, meaning a cost of roughly £2m. Meanwhile, Portuguese players Pedro Neto and Bruno Jordao were signed for a combined fee of a believed £18m, each on five-year contracts, meaning an amortisation cost of around £3.6m in total. In addition, in January Wolves signed Daniel Podence for an estimated £17m fee on a four-and-a-half year contract, and amortisation therefore will be calculated for half a season totalling roughly £1.9m. Therefore, total amortisation cost will likely increase by around £15m, taking the total to around £47.5m. Profit on player sales This refers to the difference between a player's book value on the date he was sold and the amount for which he was actually sold for. During the 2018/19 financial year, the club recorded a profit on player sales of £11.8m, an increase of £3.7m from the previous financial year thanks to the sales of Benik Afobe, Danny Batth, Barry Douglas, Dominic Iorfa and Ben Marshall. A club, in its accounts, always includes a section relating to events which would have occurred after the balance sheet date, and they have said that they have recognised profit on player sales of £2.5m, due to little money gained from player sales, and it is highly likely that the club will see a fall in this figure for the 2019/20 financial year.

Conclusions

The fact that the club was competing in the Premier League during the 2018/19 season for the first time since 2011/12, helped the club significantly improve its financial performance as they recorded a profit, clearly showcasing how lucrative promotion to the Premier League is for any club. In 2019/20, with Europa League football, it is highly likely that the club will increase its revenues, though costs will most probably increase considerably as well due to investments in the playing squad.

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