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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