The financial side of a bounce back for Wigan Athletic

Sharpe

David Sharpe offers the club new direction, but he has major challenges ahead of him.

 

“You will no doubt have heard the news by now that we will be kicking off next season in Sky Bet League One. Everyone associated with Wigan Athletic is suffering this morning but the reality is that this is where we find ourselves and I wanted to write to all of you with a personal pledge that nothing else but an immediate return to the Championship will suffice. We will bounce back.

The words of David Sharpe after Rotherham had put the final nail in Wigan Athletic’s coffin by beating Reading on Tuesday night.

Since taking over as chairman Sharpe has injected a breath of fresh air into the morale of Latics fans. The unthinkable actually happened – from winning the FA Cup to League 1 just two years later. But Sharpe’s enthusiasm for the task of getting the club back into the top echelons is infectious. After the club drifting for months like a rudderless ship Sharpe has come in and provided not only direction, but hope.

He has installed a bright young manager in Gary Caldwell, insisting that it is a long-term appointment. During just four games in charge Caldwell has already turned the style of play from the hoofball prevalent under Malky Mackay to what Sharpe calls “the right brand of football”. Sharpe continues to reiterate the club’s desire to produce a top class academy. He also plans to put in place an effective department of recruitment, something the club was lacking even in the Premier League days.

Sharpe has been impressive in his dealings with the media. Rather than look like a 23 year old novice in the role of club chairman, he has clearly enunciated his vision for the club and looked calm and confident when interviewed. Moreover he is from a generation that is skilled in the use of electronic and social media.

Dave Whelan too started off with a vision when he first took over as chairman some two decades ago. His was to propel Latics out of League 2 into the Premier League in ten years. His achievements are legendary. However, Whelan was already in his late fifties when he took over, with huge business acumen and experience. During those twenty years he was to pump around £100m into the club for them to hold their own in the upper tiers of English football.

DW is a hard act to follow. Does the young chairman not only have the vision, but also the business acumen and sheer determination needed to follow in his grandfather’s footsteps? More importantly is the Whelan family still willing to help support the club financially?

Sharpe is by no means alone in dealing with the financial side of the football club. His grandfather remains the owner and will surely be in regular contact with him. Moreover he has the capable Jonathan Jackson, a Chief Executive with a strong business background, steeped in the tradition of the club since birth.

However, the two of them, together with Head of Football operations, Matt Jackson, have a huge task on their hands over the coming weeks. No less than 13 players left the club in January. A comparable exodus is impending as Latics need to cut their cloth according to the financial realities of League 1 status.

In their last season in the Premier League Wigan Athletic had a staffing budget of around £50 million. Relegation and a huge drop in TV revenues meant that wages had to be drastically reduced, despite a parachute payment of £26 million. To keep a team in mid-table in the Championship typically involves a wage bill in excess of £20 million. Whereas to get into the top six  comes to around £30 million, which is precisely what it cost Latics last season.

With parachute payments dropping to £16m this season that the club once again needed to reduce its wage bill. The departures of ex-Premier League players Jean Beausejour, Jordi Gomez and James McArthur helped. However, manager Uwe Rosler was to bring in nine new players over the summer. Although some were younger players, not on high earning contracts, the competition in the transfer market forced the club to offer more tempting salaries to the rest. The result was a squad that was larger than the club needed with a wage bill close to that £30 million of the previous season.

The January fire sale, in which 13 players left the club, helped to put Latics back on track financially. Apart from the transfer fees received the wage bill was reduced significantly, to probably around £20 million on an annual basis. Sadly the selling of much of the family silver left Latics with a threadbare squad, short on quality. Only two permanent signings were made, coincidentally both being players who had prior experience in League 1. The squad was supplemented by young loanees and players on short term contracts.

For the coming season Latics will receive £8 million in parachute payments, plus around £2.5 million from TV money. The rest will need to come from gate receipts and commercial revenue. The club will have gone from a wage bill of £50 million to £30 million to around £10 million in the space of just three years.

Assuming the current wage bill approximates to around £20 million on an annual basis it means that it will need to be halved over the summer.

Wigan Athletic currently have 19 players under contract until 2016 and beyond. None of those were previously on Premier League contracts. However, having been signed when Latics have been in the Championship division many of them will be on salaries that are way above the norm in League 1.

Excluding loanees there are 8 players out of contract in June. The list includes goalkeeper Lee Nicholls, although rumours suggest that he is being offered a contract extension.

Given the situation Sharpe will look at selling off those contracted players on the highest salaries. Many of the most saleable assets departed in January, but players with prior Premier League backgrounds remain who will be targeted by other clubs. The most likely to attract sizeable transfer fees are Scott Carson, James McClean and James Perch. Moreover Oriol Riera has already shown in his return to Spain that he is a player who will be in demand, likely to bring in a transfer fee.

So many players have been tainted by the low morale and low confidence among the squad this season and their performance levels have dipped. With a fresh start next season and playing in a lower division, many of them are capable of significantly raising those performance levels. However, the financial reality is that around half of them will need to be persuaded to find other clubs, with their contracts terminated by mutual consent.

A few weeks back Sharpe mentioned that Latics were going to need at least ten new players for next season. With around ten retained from the current squad, ten new additions and a handful of players brought up from the development squad it would bring the club close to the squad size of 24 stipulated for League 1 clubs. Up to half of the new additions are likely to be players on loan.

Persuading such a large number of players to move on, helping them to find them new employment, is no easy matter. It will be easier in some cases than others. Some may need to move to clubs offering lower salaries, but in higher divisions than Latics. Players who have been in the Premier League not so long ago will be reluctant to damage their future career prospects by dropping down to League 1.

Caldwell will know which players he wants to retain. However, he might not be able to be so selective. Those returning from long-term injury are unlikely to be sought out by other clubs until they have proved they are fit again. Emyr Huws, Aaron Taylor-Sinclair and Grant Holt fall into that category. Holt is not only recovering from an anterior cruciate ligament knee injury, but will be 34 years of age when the season starts. Moreover he is one of the highest earners. Caldwell’s hands will most likely be tied and he will need to find ways of enabling the big Cumbrian to fit into his style of play.

Caldwell might want to keep at least some of the players whose short term contracts are about to expire. Harry Maguire is on Premier League wages at Hull and the salary expectations of ex-top flight players such as William Kvist, Kim Bo-Kyung and Jermaine Pennant will be high. Caldwell also needs to make a decision on his old teammate Emmerson Boyce. At 35 years of age, Boyce does not have the pace of before. However, Caldwell could choose to use him in a back line of three, where his experience could be useful. But then again, it would also depend on his wage expectations.

Despite Sharpe’s assertions about producing a top class academy the club has not made any recent statements about the development of the Charnock Richard site. There are fans who remain skeptical about whether the project will be brought to its conclusion. We await further news.

The framework governing Financial Fair Play in League 1 differs greatly from that of the Championship. Clubs in Leagues 1 and 2 have to operate under the Salary Cost Management Protocol (SCMP). It limits the wages that a League 1 club can pay out to a maximum of 60% of its turnover. There is no consideration given to clubs coming down from the Championship except that the salaries of players signed before September of the previous season, on contracts of three year or more, are not included in the calculations.

That would be the case of those signed by Owen Coyle prior to the 2013-14 season. However, although the retention of those players would not be contributory to breaking the SCMP protocols, the club will be reluctant to continue to pay salaries of approaching £1 million per year to the higher wage earners. In certain cases, such as that of Holt, its hands may be tied.

Over the coming weeks we will discover which players are moving on. Caldwell faces a tough decision whether to retain a handful of high earners, who would take up around half of the total wage bill, or whether to ditch as many as he can to sign up-and-coming players from the lower divisions or maybe Scotland. It could be argued that if he were to keep some of those high earners they would provide a strong backbone for his team. It could also be said that so many of those players underperformed this season and the club is better off without them.

Sharpe has made it clear that he wants promotion this season. In reality it might be too much to ask of a rookie manager in his first full season with so many new players to bed-in. However, the parachute payments only continue for two more years and after that Latics will compete on an even keel with the other clubs in the division. Promotion in the second year would become a real priority.

Turnover usually includes not only match day revenues, TV money and sponsorship deals. But interestingly the Football League also includes donations from the owners of clubs and the injection of equity. It basically leaves the door open for a rich owner to take over a club and pump money into it in a bid for promotion. Moreover there is no direct restriction on the amount of money the club can spend or receive in transfer fees.

Unlike so many clubs Wigan Athletic have been well managed financially in recent years and made profits in the past three seasons. Whether they make one this year remains to be seen, although the transfer fees received and staffing cuts made in January will help. However, the long term question is whether the Whelan family, through Sharpe, is willing to inject further funds into the club. Funds will be needed for the foundation of a top class academy and if Latics cannot gain promotion in the next couple of years the parachute payments will be gone and they will have no financial advantage over the general morass of clubs in League 1.

Sharpe has made an inspirational start to his tenure as chairman of Wigan Athletic. But the coming weeks are going to test his abilities to remain calm and level-headed, whilst being determined in realizing his vision for the club.

Then there remains the big question about injection of further funds into the club by the Whelan family, which has already given so much.

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7 responses

  1. Well done JJ in spelling out the challenges we face as a club. Fans may not like to hear it but we are still suffering the hangover associated with Premier League relegation, bad managerial appointments and terrible recruitment by three successive managers. This close season is going to be very difficult for Gary Caldwell. Moving on players is never easy and many may need a financial incentive to leave. We can almost forget about he parachute payments as an advantage.

    This is just about Ground Zero for us. While there are lots of reasons to be optimistic, (Caldwell’s style of football, the young players we have coming through, David Sharpe showing promise as a leader and the existing infrastructure at the club), it doesn’t leave me confident that we will make a major impact in League 1 next year. Consolidation and stability is what we need with an emphasis on team building. If we don’t go up, let’s just hope that there’s enough promise there to advance in the future.

  2. I’m interested in your opinion on who should stay at the club and who you think should depart the club. Do you think certain players have earned to stay at the club and if so, who do you think they are? The Andy Delort shambles, do you think we will get him back for the upcoming season? Whats your opinion on him, personally I think he could do a job in league 1, but is he worth the wages, also do you think we could sell him for anything close to what we bought him for? Furthermore, do you think we would still be able to attract loanees from some of the bigger clubs e.g. The Manchester clubs and the Merseyside big boys. Have we still got the contacts that we use to have?

    • Thanks for your input, Ben. Of the players who have been on short term contracts, Kim Bo stands out for me. If he had been there under Rosler, when so many good (if underperforming) players were at the club, he could have made a big difference. Sadly Maloney was a shadow of his former self and that lack of creativity in midfield left Delort and Riera with no decent service. Kim Bo works hard, is not easily deterred though fouled a lot, and can create chances for strikers. Sadly he had to work with the likes of Clarke, Fortune and McClean, none of whom knew how to time their runs when off the ball. Sadly I fear Kim Bo will not want to play in League 1 and his salary demands would be too high.
      Latics have two choices with Delort. No club is going to offer a good transfer fee for him because he never proved himself at Wigan. He would have to be released by mutual consent, but finding a club to match his salary might be difficult. The second choice is to bring him back. He is surely good enough to get goals in League 1 if he is played alongside another striker. His problem was that Rosler played him as the lone centre forward, whereas at Tours he played in tandem with another striker. But would it be worth taking up maybe 10% of the wage bill just on Delort? However, were he to come back and have a good season hi transfer value would soon appreciate.
      It would not be a total surprise if we got a loanee from Everton…………

  3. Great analysis JJ, and I just hope the amount of transition looming isn’t underestimated by a single one of our fans as we have made several bad decisions with regard to quick fixes in recent years. We can’t go expecting miracles.

    The other big factor with regard to income is the DW Stadium itself. Whereas it is still operated under the same holding group, it is a separate entity. If that came into the calculations then they could change dramatically.

    The rent “expenditure” would also be “income” so would be offset, to be replaced with new expenditure of stadium running costs. However, the stadium company generates a profit of around £0.5m per annum, no mean amount at League 1 level.

    By bringing the stadium under football club ownership that profit and the additional income generated (the rugby’s rent basically) becomes ours and allows us to raise that 60% threshold in absolute cash terms.

    Our income in 3 years could be as low as £3m or 4m which means £40k a week wage bill. And that’s for the whole squad when not long ago we’d pay one player that much.

    • Spot on, Jimmy, as always. Very well said.

      I could not find info on the finances of the DW Stadium, but you obviously did.

      Isn’t this another facet of the Whelan family’s sponsorship of the club? Given what DW has already put in, is it realistic to expect him to throw in the stadium too?

      But the lower the annual revenues the bigger the factor of stadium rental becomes. Is this something to do with the seemingly bizarre rumours of Latics playing at Leigh Sports Village in the future?

  4. An interesting, well written and (seemingly) well researched article, as ever.

    Your blog posts are pretty much the only Latics related fan articles I enjoy reading. Others are generally rehashed stories from elsewhere or read like they’ve been written by a below par primary school student.

    Lets hope the club can find a firm footing over the next few months and that we can start moving in the right direction.

    If promotion isn’t achieved by 2017, It will be interesting to see how many fans stick around. If we could retain an average gate of over 10,000 that would be better than all but a handful of the teams in League One looking at this season’s statistics. Support is going to be increasingly important as the parachute payments reduce and then disappear if we’re going to remain competitive (as I think you’ve touched on in earlier posts).

  5. A very good article as always. It’s a real shame about the Grant Holt situation. He was never suited to the club’s style of play, although he was suited to Coyle’s. I suppose we are still feeling the repercussions of appointing the wrong manager after Martinez.

    With regards to signings, I really do think we can exploit our link to Everton. They have some exciting young players that we can loan in. Roberto was at the Dinner for DW, so he still maintains links with the club and to Gary. One youngster in particular is George Green. He is an attacking midfielder / winger who was extremely highly-rated on the Internet at least, though seemingly less so by Everton. Apparently he is a very good dribbler and can shoot well, so he’s a bit like Ross Barkley without so much physicality. Anyway, he has been on loan at Tranmere Rovers and has done quite well there. He could be a good option along with a few others at the club, and now we probably have some good links with Liverpool after Ojo and Sinclair.

    It would be great to keep Kim, Kvist, Pearce, Bong, Waggy, Huws and others like them to form an experienced backbone to the squad. Tavernier and Taylor-Sinclair should be kept too, whereas Boyce could add some experience as well if his wages aren’t too high. Plus I expect Lee Nicholls will become first-choice keeper with Ali and Scott leaving, while Chow, Jennings, Flores, Robles, Cosgrove and Hamilton should play key roles next season. It’s clearly going to be tough next season, but promotion is certainly likely if we keep an experienced, quality core of players and build around them using our youngsters and signings.

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