Losing money to win promotion

benefactor

Figures can help provide startling comparisons, causing us to question underlying trends. Recent information and figures  from Wigan and Horwich have  once more caused questions to be raised.

Wigan Athletic lost £3.9m last season. Having to pay agents a total of £1,461,088 was a contributory factor towards the loss, which had come after three consecutive years of making a profit.

The last time Bolton Wanderers announced a profit was in 2006. Referring to their loss in 2014 the club stated that ”Net loss improved by £41.6million, down to £9.1million year on year.” A couple of weeks ago Wanderers were issued a winding-up petition by the HMRC, which goes to court on January 18th. Owner Eddie Davies has loaned the club £185m over recent years, but is not prepared to continue to pump money in. In the meantime they are looking for ways to pay their players and staff.

The scale of Latics’ loss for 2014-15 came as a surprise to most of us, although it is small compared with those suffered by other Championship clubs last season, not just Bolton.

In the summer of 2014 Dave Whelan made a calculated gamble in a bid to get Latics back into the Premier League. Is David Sharpe about to follow in his footsteps?

“The continued financial support of the Whelan family has allowed the club to continue pursuing long-term strategic goals and although the financial results for the year ended 31 May 2015 mirrored the disappointments on the field, the owners remain committed to developing and improving Wigan Athletic to enable the club to return to the highest level of English football.”

The words of Jonathan Jackson to Wigan Today after announcing last season’s financial loss.

It is certainly reassuring to hear that the owners – the Whelan family – remain committed towards getting the club back into the Premier League. The question is how they will be able to develop and improve things at the club to make it a possibility. Will the Whelan family remain the benefactors to Wigan Athletic that they have been in the past?

Last season Dave Whelan had given major backing in the transfer market to Uwe Rosler, who had taken Latics to the FA Cup semi-final and the Championship playoffs.  £7.3m was brought in through the sales of James McArthur and Callum McManaman. But £10m was spent on transfers into the club, the majority on Andy Delort, Adam Forshaw, Emyr Huws and Oriel Riera. Other signings were made at lesser prices, with some being free agents.  But not only was it the shelling out of money on transfer fees that was to cost the club, but Rosler had brought in eleven new players. The large squad that resulted was to eat away at the budget week by week.

Sadly things went pear-shaped for Rosler, who was sacked in November. Seeing his financial gamble starting to look less viable, Whelan was to embark on a huge cost cutting exercise in January. The hapless Malky Mackay was to be the manager who oversaw a fire sale that resulted in swathes of players leaving in the January transfer window.

But that too turned into a gamble that turned sour on Whelan as Latics’ severely pruned squad just did not have the quality to hold their own in the Championship under a manager who could not deliver.

With hindsight one could say that Whelan’s appointment of Malky Mackay caused more damage to the club on and off the field than anything previous in the club’s history. The January sales certainly helped rebalance the finances. If those players had stayed the budget would have been propelled much further into the red, anathema for a club that had prided itself on balancing its books. It could be argued that those players had lost the will to fight for the club and were happy to sit pretty on their inflated salaries at a time when the going was tough.

But it was the scale of the January clear out that was staggering. More than anything else it was a cost-cutting exercise, which helped reduce a potentially large budget loss for the season.

Did the January sales leave Latics in better shape for the future? The reality is that they were a major factor in the club losing its place in the Championship division.  Getting back there is not going to be easy and if Latics cannot gain promotion from League 1 this season or the next they will be in trouble. Parachute payments help provide a huge competitive advantage over other clubs but they will be at an end in the summer of 2016.

For the moment the hope is that the purge within the club and the advent of a young duo at the helm will bring forward a shining new era. But even if the dynamic duo of Gary Caldwell and David Sharpe can get Latics back into the Championship division, what would be the chances of them going further?

At the end of last season Championship clubs were over £1.1bn in debt, an average of £48.5m per club. The desire to reach the riches of the Premier League continues to drive so many clubs severely into the red. Having a benefactor owner is the key to getting out of the division. But there are clubs in the division who make every effort to live within their means, not an easy matter with the profligacy around. If Latics were to get back there, in which category would they stand?

Benefactor owners have made their mark even in League 1, where clubs live within their means much better than in the division above. Last year’s champions, Bristol City, have been bouyed by the funding of Steve Lansdown. Second place Milton Keynes Dons are owned by Pete Winkleman, who moved Wimbledon FC to Milton Keynes in 2001. Playoff winners Preston North End are supported by Trevor Hemmings, who has reduced their debt by more than £50m since 2010. During the 2013-14 financial year, he waived £18.7m of debt and £15m through a share issue.

Wigan Athletic will look towards breaking even financially on the current season. They are likely to continue to shed higher wage earners this January, as they did just over a year ago and in summer. Players on Championship-level salaries will be encouraged to leave. Squad size could also diminish.

A few miles away in Horwich, Bolton Wanderers will surely do something similar but on a larger scale. They have to drastically cut their costs and a fire sale like that one in Wigan just over a year ago is on the cards. They will surely be heading towards League 1 next season, but will they meet their local rivals there?

Whether Gary Caldwell can achieve promotion this season remains to be seen. Perhaps it will be next season, or perhaps Latics will be marooned in a division where they will no longer have a financial advantage over the rest.

But in the current climate of English football the level of elevation will depend on the funding of a benefactor. But Dave Whelan’s role in Wigan Athletic’s rise was not solely as a benefactor. He was a visionary who made it possible through his hard work, knowledge and dedication.

David Sharpe has a hard act to live up to. But he has already revealed a vision that can take the club forward, impressive for such a young man.

But is Sharpe capable of being the chairman who can not only run a balanced budget this season, but provide the benefactory backing for the club to eventually get back into the Premier League?

The Whelan family have done so much for Wigan Athletic over the past two decades. How much more can we expect from them?

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Investing in Wigan Athletic –what comes next?

dave whelan espn

I read a quip the other day that amused me.

It is relatively easy to take out £1m by being the owner of a football club. All you have to do is first put in £2m.

Dave Whelan reportedly put £100 m into underpinning Wigan Athletic’s success over these past two decades. One wonders what he will get back.

Football clubs are probably the worst run businesses to invest in. So few make a profit because of mismanagement within and the pressure on clubs to spend to keep up with others. So many are kept afloat by their owners and benefactors.

According to Sir John Madejski, Reading chairman, the ideal football club owner is “someone with deep pockets, mercurial, and not faint-hearted.”

That could well describe Whelan over these years. His generosity to his home town club has been exceptional. Through converting debt to equity he has effectively given the club financial stability.

The case of Bolton Wanderers differs. They currently owe Eddie Davies over £165 m. Davies, now 67 years old, made his money out of thermostats for kettles and moved out of Bolton in his twenties. When he bought the club in 2004 fans expressed concern that they were now owned by an Isle of Man tax exile via a trust listed in Bermuda.

Davies has not actually given the money to the club, but has provided loans on which they have had to pay interest payments every year. The last time Wanderers made a profit was in 2006 and even that was close to breakeven. Put simply they have been living beyond their means for so long and if Davies were to pull the plug the very existence of the club would be at severe risk. Today’s Daily Telegraph reveals that Davies would be willing to sell the club, should he right buyer come along. But is any potential buyer going to be willing to takeover so much debt?

Dave Whelan’s silence over the past couple of months has caused unease among so many Wigan Athletic supporters. We had become so reliant on him to provide the financial backing needed for the club to make forward strides. However, over the past four years he has insisted on the club at least breaking even financially. The profits made over the past three seasons have made Latics a beacon among the dark and shady world of mismanagement typical at so many football clubs. Breaking even this season will be more of a challenge, but the selling off of assets and the reduction in liabilities that happened during the January transfer window will surely put things back on track.

The apathy by which fans have witnessed the selling off of many of the most accomplished players can be viewed as a sign that people are beginning to lower their expectations for Wigan Athletic Football Club. The notice boards and social media are awash with comments amounting to something like the club being bigger than just one man and that it can be run with dignity in the lower divisions. As always there are the cynics who suggest Whelan is pocketing profits, getting some money back after so many years of putting it in.

One thing we can expect over these coming weeks is for Whelan to step down as chairman. It remains to be seen if his grandson, David Sharpe, will take over the role.

The big question is whether the Whelan family will continue to pull the strings at the club in the long-term, or whether the house is being put in order for a sell off.

Should the Whelan dynasty continue we can expect the club to continue to be run on a breakeven basis.  After all could any of us reasonably expect the Whelans to pour in more funds in the hope of restoring past glories?

However, for a business to be run on even a breakeven basis there needs to be some kind of strategic plan. This would involve the fashioning of a new identity for the club that fits its current situation.

Gone is the romantic idea of “Little Wigan” holding its own in the world’s most wealthy football division. In its place needs to come a more grassroots identity, a club noted for its coaching and development of players who can be sold on in a systematic basis rather than the awful fire sale we have recently witnessed. The club as a finder of raw talent that it hones into a lustrous product that it cashes in on to keep itself moving forward.

The alternative is to stand still, which tends to inevitably lead to dropping back.

A key strategic issue that needs to be addressed is the development of an academy at Charnock Richard. Apart from the capital costs, which can be covered by incoming transfer dealings over the past year, will it be a moot point because of the operating costs it entails?

However, the probability is that Latics will be in League 1 next year. The FFP rules differ significantly there from those of the Championship division. Clubs are only allowed to spend up to 60% of their revenue on player salaries. Moreover standing costs for the club will need to be thinned down proportionate to the drop in revenue. Should that be done effectively it would surely leave some wiggle room for an academy which would cost around £2m to operate.

The starting lineup that faced Cardiff City on Tuesday night included only three players with contracts that go beyond this summer. The likelihood is that few of those short term signings or loanees have a future at the club. Moreover should relegation become reality Latics are going to have to shed not only those at the ends of their contracts, but a significant number of the players who were signed on contracts that could be considered lucrative by Championship standards.

When Wolves were in a similar situation in the summer of 2013 they released seven players, sold two and sent seven more out on loan. By the end of the season they had done seventeen loan deals of their players out to other clubs, They brought in three new players over the summer, with another five coming in January, including Leon Clarke and Nouha Dicko. They had only two incoming loans, both short-term in the first half of the season.

The key for Wolves turned out to be the appointment of manager Kenny Jackett, who remains in charge as they sit in eighth place in the Championship table. It remains to be seen whether Malky Mackay would be entrusted to try to follow Jackett’s lead should Latics get relegated.

Many fans are nervous about the possibility of the club being sold. Even if Latics are in League 1 next year the club will be a possible target for purchase. Through its successes, particularly in the past decade, the Wigan Athletic “brand” has gained considerable prestige. Moreover the club is close to being debt free. The fan base might pale in comparison with big city clubs, but has grown so much over these years. The club has a fine stadium and has bought a potentially excellent site for a youth academy.

Fears of the club being taken over by a foreign owner may be justified to some degree. However, with a new owner willing to invest in the club like Whelan did before, Latics would have a competitive edge compared with an austerity-laden approach that might operate under a Whelan dynasty regime.

Put simply, were Latics to be relegated they would have to compete with at least half a dozen ex-Premier League clubs in League 1. What would give them any kind of competitive advantage over those clubs and others in the division?

Without Whelan’s financial backing Latics would not have achieved what they did over the past twenty years. Without an owner willing to invest significant funds into the club it is going to considerably lower the odds of them getting remotely back to where they were three years ago.

Where Wigan Athletic will be ten years from now is impossible to predict – Premier League or Northern Premier League?

No matter who owns the club it will need to refine its vision and direction.

Without that it will meander into mediocrity.

The departure of the cup winning icons

watsonSteve Bruce signed Ben Watson for Wigan Athletic in January 2009. Watson scored what was considered a crucial goal in a 2-1 win away at Sunderland a couple of months later. But neither Bruce nor Watson could have guessed that the same player would score the most important goal in Latics’ history some four years later.

Ben Watson became a household name through his fantastic header from Shaun Maloney’s corner. He caught the attention of not only the media, but also of other football clubs. Watson’s contract ends in summer and there is a strong possibility that Latics will cash in on any reasonable offer that comes in.

It has never been easy for the likeable Watson at Wigan. In his early years with the club he was sent off on loan to both West Bromwich and Queens Park Rangers. His best season was in 2011-12 when he made 23 starts with 6 appearances from the bench. In the latter part of that season he was superb in the deep-lying playmaker role as Latics shocked the Premier League elite with amazing results.

Jordi Gomez’s contract is also up at the end of the season.

Gomez was pivotal in the cup run, scoring three goals and making four assists. His assist for Callum McManaman’s goal in the semi-final against Millwall will stick in the minds of Wigan supporters for years to come. In the FA Cup Final Gomez had played remarkably well in a midfield holding role, but as fate would decree, he was the one to go off after 81 minutes to allow Watson to come on.

Like Watson, Gomez has never had an easy time at Wigan.

Roberto Martinez brought him to Wigan in the summer of 2009, following excellent performances for Swansea. Gomez tends to polarize opinion at Wigan. His fans regard him as a skilful player who can dictate play and make a difference. His detractors would say he does not like” to get stuck in” and passes the ball sideways or backwards too often

Were either Gomez or Watson to leave Latics this month they would leave behind great memories of their role in the club winning the FA Cup. But why would Latics allow them to leave?

Financial considerations must clearly come into play. Latics have had a huge drop in their revenue through relegation from the Premier League.

A look at what happened to Bolton Wanderers a year before is chilling.

Last season Bolton spent their first year back in the Championship after 11 years in the ‘greed league’. They have recently released the financial figures for the year ending June 2013. It reveals a loss of £50.7m.

They had a turnover of £28.5m, compared with £58.5m the year before. Although they had cut staff salaries down around 33% from the previous year is still came to £37.4m, way beyond turnover. Gate receipts amounted to only £3.8m. It is the broadcast revenue that hit Bolton hardest, at £19m compared with £42m the year before.

Even with a parachute payment of around £16m, Bolton still made a huge loss.

Bolton continue to survive thanks to owner, Eddie Davies, to whom they are indebted by over £150m. However, financial fair play regulations will tighten the knot on Davies’ contribution in the future.

In Latics’ latter years in the Premier League Dave Whelan put them on a sound financial footing. Roberto Martinez worked wonders on a limited budget and won the FA Cup in the process.

It is now a period of adjustment. Wigan Athletic have to deal with the decreased revenues in the Championship and make best use of their parachute payments while they last.

Big money signings in the January transfer windows are unlikely. Latics need to continue to downsize their staffing costs towards Championship norms.

One thing is for sure. The financial gap between the Premier League and the Championship will continue to grow.

Wigan Athletic need to regain their place in the elite league or risk sinking down into the lower echelons when the parachute payments run out. Let’s look at playing the likes of Liverpool or Arsenal, rather than Rochdale or Macclesfield.

In order to maintain financial stability it will not only be the likes of Ben Watson and Jordi Gomez in the shop window for the January sales.

But both players will have a place in the hearts of Wigan Athletic supporters if they do depart this month.

Without them Latics would not have won the FA Cup.

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