Tag Archives: FFP

Seeing through the gloom – the way ahead for Latics

Posted by JJ (Tony) in Specials and tagged with , , , , ,

Gloom

They say that you have to experience the lows in life to truly appreciate its highs.

It is certainly a low time for Wigan Athletic. They stand second from bottom of the Championship after 19 matches, having won only three. Moreover the positions of both the new manager and the chairman are precarious, pending the results of FA investigations. The last manager was undone by player power and the new manager has failed to win either of his first two games.

Who will be running the club six months from now? How many players and staff will be gone by then? Will Latics still be in the Championship division? Will the financial future of the club be safeguarded?

It is indeed a time of doom and gloom, amid a prevailing air of uncertainty.

It is in such times that negativity and pessimism come to the fore. Fans are justifiably disillusioned with a squad of players that have let the club down up to this point. Indeed one of the Latics fan forums is currently running a thread entitled “Who would you get shut of?”

But despite the frustrations, pointing the finger at individual players is not going to help matters. Despite his rotation policy and mesmerizing team selections, Uwe Rosler put together a squad good enough to challenge for promotion. What has happened since the season started in August is now water under the bridge, but it has left the players in a crisis of confidence.

Good players have not become bad ones over these three months. It is not so much that individuals have played so badly, but more to do with their ability to play as a unit. The sum has been much less than aggregation of  its parts.

Dave Whelan has taken flak for his appointment of Malky Mackay, not just from the national media but from Latics fans. At times it has seemed that Whelan made a big error of judgment. Fans have been frustrated by the lack of goals, but Whelan has appointed a manager whose teams have not been known for their flowing, attacking football. There is more unsettling gossip in the media about Latics bringing in Ryan Giggs as manager should Mackay be suspended by the FA.

However, there exists the possibility that Whelan did know what he was doing. Mackay knows the environment of the Championship division. He is also reputed to be a motivational manager. Mackay has also had lots of experience in dealing with significant turnovers of players at the end of their contracts. Could it be that Mackay has been brought in to clear out the bad eggs in the Latics dressing room?

Mackay wisely turned to the old guard in his first match in charge. He needs them behind him if he is going to create stability and raise morale in the dressing room. Moreover in times of adversity managers typically rely on their most experienced players. The starting eleven against Middlesbrough contained five players from the Roberto Martinez era and four signed by Owen Coyle. The average age of the back four was thirty plus. Just two of the eleven players signed by Uwe Rosler – Adam Forshaw and Andrew Taylor – started in that game and the next one at Sheffield Wednesday.

No fewer than ten players have contracts which finish at the end of the season.  Most of those are approaching 30 or are on the wrong side of it. Eight of them – Al Habsi (32 years old), Boyce (35), Caldwell (32), Espinoza (28), Maloney (31), Nicholls (22), Ramis (30) and Watson (29) – remain from the Martinez era. The other two are Fortune (33), signed by Coyle, and Kvist (29) brought in on a one year contract by Rosler.

Given that Latics have only 17 points from their first 19 matches, Mackay will be looking at consolidation rather than promotion. Financial considerations will increasingly come into play.

Mackay recently stated that “This is a business, and after we’ve assessed the situation. There will be players moving out as well as coming in. After two or three weeks you get to know every player, how they train, their strengths and weaknesses. It will take two or three transfer windows for it to be ‘my team’, for the team to be sufficiently tweaked.”

His remarks indicate that the merry-go-round of players that we have seen over the past year will continue. Coyle brought in ten new players and Rosler signed eleven.

Since the summer of 2013 Latics have made a profit in the transfer market. The fees recouped through the sales of cup final winners McCarthy, Kone and McArthur have more than compensated for the relatively small fees paid by Coyle for Barnett, Holt, McClean and Perch plus the more considerable sums spent by Rosler on Delort, Forshaw, Huws and Riera. The flip side is that Latics lost quality when McCarthy and co left the club. Even more quality was lost as Beausejour and Gomez left at the end of last season as free agents.

In order to bring in his own players Rosler allowed the senior squad to swell beyond 30 players. He had clearly been keen to transfer out higher salary earners such as Al Habsi, Holt and Ramis but was unable to do so. Moreover the signing of Figueroa on loan meant that Latics had not only four left backs on their books, but had enlarged a squad that was already bloated.

Next year the club’s parachute payments will halve to £9m. Not only will Mackay have to follow in the footsteps of Coyle and Rosler by staying in the black in the transfer market, but he will have to make significant cuts in the wage bill. He will need to shed higher wage earners and considerably reduce the size of the squad.

Latics are clearly going to lose more quality players by the end of the season. They could well start the 2015-16 season without any of the players that played in that magical FA Cup final of 2013. The moment of Watson’s famous header will stay etched in the minds of Latics supporters for the rest of their lives. But somehow it needs to be put out of mind for a period of time as Latics adjust to a new reality.

Dave Whelan backed Uwe Rosler and Latics got within touching distance of the Premier League last season, but could not quite make it in the playoffs. He continued to back Rosler this season in bringing in new players. It all looked so promising, but it just did not happen.

A significant proportion of Latics fans remain critical of Rosler’s signings, whose performances up to this point have been less than eye-catching. Adam Forshaw has not yet lived up to his transfer fee and the hype he received at Brentford and the form of overseas strikers Andy Delort and Oriel Riera has been below par. Martyn Waghorn, signed last season, has fallen under the radar. Andrew Taylor has shown flashes of his best, but does not yet convince. However, Mackay had taken both Taylor and Don Cowie with him from Watford to Cardiff and we can expect them to feature regularly.

Cowie is already under criticism from a section of fans, but he is the kind of unspectacular “water carrier” that a Championship team often needs in midfield. William Kvist is Denmark’s captain and can surely do a job as a holding midfield player. Emyr Huws is an exciting young talent, who has all the skills needed to play at the highest level. What he lacks is experience and he will find that hard to get now, given the competition for midfield places. James Tavernier is one for the future, his quality crossing and delivery from set pieces a real asset, even if he is not yet up to par defensively. Young left back Aaron Taylor-Sinclair has yet to step on the pitch in a league game.

It may be that Rosler’s signings will come good with time. They came into a struggling side, with a manager who had lost the plot. Latics made major investments in the signings of young players. Forshaw is  23 years old, as is Delort. Huws is 21. Only time will tell if Rosler picked up free transfer bargains in the 23 year olds, Tavernier and Taylor-Sinclair, and the 24 year old Waghorn.

Coyle will be remembered more than anything else for the signings of the then 32 year old strikers, Grant Holt and Marc-Antoine Fortune. However, in Leon Barnett, Scott Carson, James Perch and Chris McCann he signed experienced practioners who will most likely form the  backbone of Mackay’s team.

If there is a cancer within the playing staff then Mackay will deal with it. Rosler had a clear view of the style of football he wanted but the players were apparently unable or unwilling to deliver it. Did Rosler just did not have the credibility with the players that he needed to motivate them to deliver his vision?

Mackay will need to be tough in cutting out any cancer that might be there. He will also have to show the kind of fortitude that we saw in Martinez, insisting on his preferred style of play and not bowing to fan pressure. He will need to show the door to certain players, even if some are popular with supporters.

It remains to be seen what will happen with the FA charge against Whelan. However, at 78 years of age the chairman will surely be looking at handing over the reins in any case. If the FA decision causes him to resign as chairman he will remain the owner of the club and will surely continue to pull the strings behind the scenes. With his home base in Barbados, Whelan has been devolving authority to the Chief Executive, Jonathan Jackson to run the club’s daily business.

No matter what happens on the pitch this season the club is likely to be in a far superior position financially than most in the Championship division. Latics’ balance sheet for the 2013-14 season is due to be published shortly and it will make interesting reading. Whelan has insisted on prudent financial management and it will be a surprise if the club went into the red last season after receiving parachute payments and gaining extra revenue from its Europa League campaign and reaching the semifinal of the FA Cup.

Yesterday was the deadline for clubs to submit their accounts for the 2013-14 season to the Football League. Any club breaking FFP rules will have a transfer embargo imposed until it turns itself around to meet them again. A fascinating study by Ed Thompson suggests that Birmingham, Blackburn, Bolton, Bournemouth, Middlesbrough and Nottingham Forest are ‘very likely’ to fall into that category. Latics fall into the category of ‘very unlikely’ to receive a transfer ban.

ffptableWigan Athletic’s sustainability in the long term will partly depend on their ability to develop young talent. An article on the club’s official site yesterday highlighted the under-18 side being undefeated in 11 matches. Coach Peter Atherton quoted that: “Things are heading in the right direction, Gregor Rioch has come in as Academy Manager and he’s implemented a lot of changes to put us on that correct track…….. The success has come sooner than we probably expected, but we’re not getting carried away.  The lads will continue to work just as hard. We should be at the top of this league and we’re aiming higher up the Academy pyramid.  We’re happy with the direction we’re heading in and what we’re achieving.”

To be heading a division of the Football League Youth Alliance largely composed of clubs from League 1 and 2 would not appear such an achievement, but it is a sign of the improvement shown at academy level. The new facility at Charnock Richard is due to be completed by 2016 and it is clear that Latics are ramping up their youth programme aiming for a Category One Academy.

A year from now Malky Mackay may or may not be the manager, Dave Whelan may or may not be the chairman. A swathe of players will have departed, possibly backroom staff too.  But the club will be financially stable and well run.

The squad will not have the quality to which we have grown accustomed. Most of the household names will have departed. But Latics will have a team that is hungry for success, with a nucleus of capable and experienced pros together with exciting young talent.

Latics will have bucked the trend of overspending as has been the wont of so many other clubs .

Then there is the prospect of a Category One Academy and long-term sustainability.

Things might seem gloomy at the moment, but there is light at the end of the tunnel.

 

Related articles on Amigos:

Finances, FFP and the long term future for Wigan Athletic

FFP and Latics – should Whelan splash the cash?

 

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FFP and Latics – should Whelan splash the cash?

Posted by JJ (Tony) in Specials and tagged with , , , , , , , , , , , ,

2012-moneyball

Bournemouth has never had a team playing in the top tier of English football. They entered the Football League in 1923 and AFC Bournemouth play in a stadium that holds 11,700. They had 91% occupancy last season when they challenged for a playoff place, eventually finishing 10th in the Championship.

Owned by Maxim Demin, a Russian petrochemicals billionaire, they would like to see the Financial Fair Play (FFP) rules changed. They claim that less than half of the clubs playing in the Championship now were present when current FFP regulations were agreed. In May their chairman, Jeremy Mostyn, said that “What we have is an ambitious owner who has a desire to take this club as far forward as he possibly can…….but what is wrong with having an owner who is determined to put his own money into a football club and take it as far as he can?”

Demin wants to see his club in the Premier League. In gaining promotion from League 1 in 2012-13 they lost £15.3m. He is clearly prepared to put in the funds to launch them up another division.

Wigan Athletic fans know what it is like to have an owner who wanted to get his club into the Premier League. It cost Dave Whelan an awful lot of money not just to get Latics into the elite circles, but also to keep them there. If FFP had existed a decade ago it is highly unlikely that Wigan Athletic would have been able to climb up to the Premier League.

In their final two seasons in the Premier League Latics were among a small minority of clubs that actually made a profit. After years of Whelan pumping money into the club it was starting to look like it could become self-sufficient. But relegation meant that the parameters changed – breaking even in the Championship was to be a very different proposition to doing the same in the Premier League.

Last season Latics were due to receive £23m in parachute payments from the Premier League. With an historic Europa League campaign coming up the club decided to largely invest the parachute payments into maintaining a large squad. It is believed that the club had previously written into players’ contracts that their salaries would drop if they were to be relegated from the Premier League. Moreover a number of players left the club, several at the ends of their contracts, others for significant transfer fees.

The proceeds from the sales of Arouna Kone and James McCarthy to Everton probably amounted to around £18m, although the payments were to be staggered over a time period. Most fans expected a sizeable chunk of that money to be reinvested in signing players who could help get the club back into the Premier League. Owen Coyle came in and did a remarkable job in bringing in 10 new players in the space of a couple of months, some having been at the ends of their contracts, some loan signings and others for what appeared to be bargain prices.

With hindsight Coyle was to make one major blunder, paying around £2m for the 32 year old Grant Holt and giving him a 3 year contract. At the time Holt looked like a good signing, given his proven goal scoring record, although the length of the contract raised eyebrows at the time. However, Coyle paid modest fees to acquire Leon Barnett, Scott Carson and James Perch, who have proved to be good signings. He paid a little more to sign James McClean, who took a drop in pay to join Latics from Sunderland. Although the Irishman remains enigmatic he might well become a key player in the future. Coyle’s acquisition of Chris McCann, who had reached the end of his contract at Burnley, was by no means lauded at the time, but the Irishman was to prove a quality signing. Seven of Coyle’s signings remain Latics players, although Juan Carlos Garcia has gone to Tenerife on loan.

The sum total of the transfer fees paid by Coyle would approximate to that received through the sale of Kone. It is assumed that the sum roughly equivalent to that due to be received through McCarthy’s transfer will be allocated towards the development of the new training and youth development facility at Charnock Richard.

Latics actually performed relatively well last season in using their parachute payments to assemble a squad good enough to reach 5th place in the Championship. In the previous season the clubs who came down from the Premier League – Blackburn, Bolton and Wolves – finished in 13th, 16th and 18th positions, despite parachute payments of £16m.

With the parachute payment and funds gained from the Europa League campaign, together with prudent financial management, it is likely that Wigan Athletic at least broke even financially last season. The projected cost of the Charnock Richard facility has not been announced by the club, although Latics clearly made a bargain in buying the site, which was auctioned at a guide price of £650,000.

The accounts will make interesting reading when they are announced in a few months’ time.

Under the current financial regime at the club, Wigan Athletic are highly unlikely to incur penalties under FFP rules. The challenge is whether they can secure promotion back to the Premier League against clubs who are spending millions on new players. Fulham’s investment of £13m on Ross McCormack was staggering, especially for a player who has never played in the Premier League. Last season both Leicester City and Queens Park Rangers flouted FFP rules in gaining promotion. The London team is reported to have had a budget of £70m last year, exceeding that of Atletico Madrid, La Liga winners and Champions League finalists. They lost £23.4m over the season.

The rules for FFP for the Championship division differ from those of the Premier League and Leagues 1 and 2. For the 2013-14 season clubs were required to restrict any losses to £3m. However, it gave the owner of the club the option of converting up to £5m of any loss into equity, putting in cash to buy shares in the club. It cannot be done by borrowing money. However, if these were to be met and the losses did not exceed £8m there would be no penalty.

Clubs are required to submit their accounts for the 2013-14 season on December 1st. Any club that exceeds the limit will have a transfer embargo imposed until it turns itself around to reach FFP rules.

One club that appears certain to have a transfer embargo placed on it in January is Blackburn Rovers. They lost an incredible £36m in the 2013-14 season, wages alone accounting for 115% of revenue. The transfer of Jordan Rhodes for big money would help them to balance their books for the 2014-2015 season, but they face at least a year of transfer embargoes until the accounts are once more submitted in December 2015.

The Football League has a “Fair Play” tax in the case of clubs who overspend, but are promoted to the Premier League. The tax is on a sliding scale, but QPR are due to pay over £17m on their overspending last year. The Championship clubs voted overwhelmingly to impose the Fair Play tax, but the implementation of the scheme relied on the support of the Premier League, which has not materialized. At this stage it looks like QPR have got away with it, but it remains to be seen what will happen if they get relegated and return to the Championship.

Championship clubs continue to overspend in their ambitions to reach the Premier League, not only in transfer fees, but also in salaries. In the 2012-13 season only five clubs in the Championship made a profit. Leicester City lost £34m that season and if FFP rules had been in effect there is no way they would have avoided a transfer embargo, making it unlikely they would have been able to build up a squad strong enough for promotion the following season. It will be interesting to see if clubs fared any better last season, knowing that FFP was coming into effect.

Almost half of the clubs in the Championship are receiving parachute payments. This gives them a considerable financial advantage over the others who receive a “solidarity payment“of £2.3 million from the Premier League, one tenth of that of a club in its first year of parachute payments. The imbalance among the clubs has led to suggestions that clubs with parachute payments should have TV money withheld and that a salary cap be introduced for clubs.

Because of the financial support through the second parachute payment now is the time for Latics to really push for promotion. Over the next two years the payments will decrease and after that Latics would receive only the meagre consolidation payment that teams like Bournemouth are receiving. However, they are now competing against clubs who have just come down with bigger parachute payments plus other clubs who do not seem to be afraid to splash money on transfers despite FFP.

Latics desperately need another striker who can win matches by scoring goals. The question is how far is Whelan willing to go in the bidding wars that start up as the transfer window deadline day draws closer? Brentford sources are suggesting that Latics are going to have to pay more for Adam Forshaw than we previously thought. Moreover a good central striker is going to cost money.

Whelan will want to squeeze as much as he can out of any deal for James McArthur in order to finance the other two purchases. The hold-up in the Forshaw transfer might well be because Latics need to get the McArthur deal finalized first. There has been no news about other Latics players being sought by other clubs, but it remains a possibility at this late stage.

Whelan, Jonathan Jackson and Uwe Rosler deserve credit for the way the club is being run on a sound financial basis. Looking at the plight of near neighbours Bolton and Blackburn highlights the fact. Latics are likely to be one of the leaders in the division in terms of meeting FFP conditions.

However, whether Whelan will allow potential outgoings on transfers to exceed the incomings is a moot point. If he does not do so it will almost certainly jeopardise Latics’ chances of going up this year.

Dave Whelan is first and foremost a businessman. He will have some key business decisions to make over the next few days.

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Finances, FFP and the long term future for Wigan Athletic

Posted by JJ (Tony) in Other and tagged with , , , , , , ,

2012-moneyball

Leicester City were once again champions of the second tier of English football this year. No club has done that more than the Foxes, this being their seventh title.

Leicester were deserving winners of the 2013-2014 Skybet Championship. Manager Nigel Pearson had built up a squad that in terms of quality and depth was far superior to those of the majority of the other clubs in the division. His success was reflected in their tally of 102 points for the season, the joint highest since 2005-06 when Reading amassed an impressive 106 points.

But did Leicester buy their success?

Leicester lost £34 million in the 2012-13 season, beating what had been a record deficit of £29.7 million the previous year. However, the Financial Fair Play (FFP) rules came into play at the start of the 2013-14 season. FFP was to allow Championship clubs to lose no more than £8 million this season or they would face a fine or a ban on player transfers. Leicester’s Thai owners had lent £75 million, but facing FFP they drastically reduced the club’s debt by conversion into equity, as Dave Whelan did at Wigan. The Leicester Mercury  reports that the club can “effectively make a £13 million loss and still comply with these rules. This is because the rules do not include costs relating to the youth academy and various one-off losses.”

The FFP rules clearly have some loopholes and Leicester’s accounting team, like those at many other clubs, will be keen to manipulate them and not pay the penalties. Leicester still expect to meet that £13 million loss target.

In contrast with Leicester’s total losses of almost £64 million over the two seasons from 2011-13, Wigan Athletic actually made a profit in each. Reversing a spiral of losses spanning decades, Latics made total net profits of £4.3 million in 2011-12 and £822,000 in 2012-13. That was accomplished while they were in the Premier League.  Can they continue to make a profit – or at least break even – in the totally different environment of the Skybet Championship?

When Wigan Athletic were relegated from the Premier League last season it was clear that both revenues and attendances were going to drop. The question was going to be – by how much?

Latics’ gate money in the Premier League days was always dwarfed by the TV revenues they were receiving and from a purely financial viewpoint attendances were not much of an issue. Last year match day revenues covered no more than 10% of total revenue of £56.4m. Without the television revenues, the club could never have seriously competed in the Premier League.

However, relegation entailed a huge loss in TV revenue – an average Premier League club now receives around £60 million, while the average Championship club receives around £2.5 million. It was clear that the club would need to look at maximizing its other sources of revenue. However, parachute payments (£59 million over four years, including £23 million in the first) would help cover the shortfall  and give Latics a competitive advantage over the majority of the clubs who receive only the £2.2 million Premier League Solidarity payment.

Financial accounts for the season just finished are not yet available, but the likelihood is that the majority of the clubs in the Championship once again lost money. In 2012-13 only five clubs made a profit: Blackpool, Crystal Palace, Huddersfield, Peterborough and Watford. Most of those clubs did so through their business in the transfer market.

The Championship clearly has a long way to go in terms of marketing itself. Its television revenues are paltry in comparison with the Premier League. This despite the fact that  average attendances for the Championship division place it in eighth place of leagues in the whole of Europe.

With an average of 43,497 the Bundesliga once again tops the attendance charts in Europe ahead of the top flight leagues in England, Spain, Italy, France and the Netherlands. The second division of the Bundesliga had an average attendance of 17,888, with England’s second tier following with 16,605.

Wigan Athletic’s average league attendance of 15,177 this season was some 8% below the division  average. Brighton topped the attendance table with an average of 27,283. However, Latics ranked third in attendances away from home drawing an average crowd of 17,370, bettered only by Leeds and Burnley.

In the two years they had spent in the Championship division prior to promotion, Latics averaged 9,531 in 2003-04 and 11,563 in 2004-05 when they finished second. Latics now have a much bigger and younger fan base than they did then. That core of younger supporters will help attendances remain at least where they currently are at the moment unless the club is relegated.

On a local level their attendances remain above those of Wigan Warriors who averaged less than 14,000 in 2013.  Since Latics entered the Premier League in 2005 their attendances have been constantly superior. The challenge will be to hold them there whilst remaining in the Championship. Latics highest league attendance at home this year was 19,226 against Leeds United. The lowest was 12,970 when hosting Yeovil.

Latics’ Lancashire rivals in the Championship are old clubs with fan bases built up over more than a century. Wigan Athletic were formed in 1932, got into the Football League in 1978 and the Premier League in 2005. Their average attendance in the 1993-94 season just twenty years ago – not a long time span compared with the age of those clubs – was 1,897, which is an eighth of what they had in this 2013-14 season.

This season their average attendance was higher than those of Burnley (13,719 – founded in 1882), Blackpool (14,216 – founded in 1877) and Blackburn (14,961 – founded in 1875), being bettered only by Bolton (16,140 – founded in 1874).

During their stay in the Premier League Wigan Athletic wisely kept their ticket prices well below those of most other clubs. The ticket prices  remain competitive in the Championship. In the 2013-14 season the lowest price for a ticket at the DW Stadium was £15, equal to costs at Blackburn, Leicester and Nottingham Forest. Such tickets were cheaper only at  Derby and Huddersfield at £10. Moreover Latics’ cheapest season ticket price of £280 was below average, being bettered only by Yeovil £273, Bournemouth £250, Derby £230, Blackburn £225, Blackpool £195 and Huddersfield £199.

Through playing successes in recent years, keeping admission prices low and an increasing involvement in the local community the club has built up a fan base that now rivals those of their venerable neighbours and competitors. Through Whelan’s actions of converting debt into equity, Wigan Athletic are currently close to being debt free. They are being run along sound financial lines and are not living beyond their means, as is the norm with most Championship clubs.

However, the Championship is a difficult environment in which to operate. It is the parachute payments that are currently keeping Latics afloat. In order to hold a mid table position a club typically carries a wage bill in excess of £20 million. But the total of match day receipts, television revenue and commercial revenue is unlikely to reach £10 million next season and they will be without the financial benefits of the Europa League.

The long-term future for Latics in this division appears bleak. Parachute payments will decrease by £5 million next season, when Latics really need to put in a concerted effort to get back to the Premier League where they would have the huge financial buffer of media revenues. They will face stiff financial competition from the relegated clubs – Cardiff, Fulham and Norwich – with their first year parachute money and Premier League squads. Moreover  there are other clubs, not long departed from the top tier, receiving such subsidies. What will happen if Latics do not get promotion within the next three years?

Over recent years there have been a lot of clubs who have maintained high wage bills, without the playing success to match it. However, the clubs near the bottom of the table have almost invariably tended to be those with the lowest wage bills.

In an interesting study of Championship club finances made by Kevin Messere he quotes that: “Typically to finish in the top six a cost base of £30M is required.” Given the figures we have already looked at, Latics are unlikely to be able to reach such a figure without making a loss, unless they use financial reserves or make a healthy profit in the transfer market. However, given the significant outlay to be made at Charnock Richard they are unlikely to have much in reserve. The inference is that Uwe Rosler will have to sell off some of his prized assets or to cut his squad size drastically.

Given the inability of the Football League to attract big money from the media there will continue to be a large imbalance in income in the Championship division for years to come. Parachute payments give a huge financial advantage to clubs coming down from the Premier League, although many have been weighed down by the salaries of players remaining on long-term contracts. In 2012-13 relegated clubs Bolton and Blackburn had costs amounting to around £50M, leading to big financial losses over the season, despite the first year parachute payments they received.

Given the precarious financial future ahead of the club, Dave Whelan has made a bold move in purchasing what promises to be an excellent venue for a youth academy. Put simply, Wigan Athletic needs to be a “selling club”. Selling one prized asset each year might well be enough to keep the club afloat over the long term, no matter which division they are in.

It is going to take some years for the club to be able to develop its academy sufficiently to provide potential first team players. In the meantime it will be a matter of making astute signings, of young players in particular, who can be nurtured and eventually sold on.

We can expect a lot of changes over the summer. Rosler will have to look at offloading players with high salaries and will have to reduce his squad size significantly. Changes might also be made within the coaching and backroom staff, with him bringing in people who have worked with him previously who know his philosophy and the style of play he seeks. Ex-Brentford assistant manager Alan Kernahan and coach Peter Farrell will surely be under consideration.

Next season promises to be a fascinating one for Wigan Athletic. Rosler will lose a number of quality players over the summer. The question will be whether he will be able to find quality replacements, given the financial resources at his disposal.

In the meantime Latics will strive towards long-term sustainability as a higher echelon team in English football.

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Lessons to be learned from Middlesbrough

Posted by JJ (Tony) in Other, Reflections and tagged with , , , , ,
Steve Gibson

Steve Gibson

Wigan Athletic’s failure to win at Middlesbrough on Tuesday leaves them seven points short of the play-off zone, level on points with the north east club, but having played two games less.

“Before the game I would have taken a point” said Uwe Rosler, nevertheless disappointed with his team’s performance and their inability to play the high-tempo, high-pressing football he seeks.

But should Latics be expected to win at places like Middlesbrough? Do Wigan Athletic have any comparative advantage over a club like Boro?

Boro had been in the Premier League for 11 seasons before they were relegated in 2009. Their highest position was 7th in 2004-05 and the following season they reached the UEFA Cup Final. Founded in 1876 they have only spent two seasons outside the top two tiers of English football.

Being in the Championship has been a sobering experience for those in Rosler’s squad who have come down from the Premier League. Middlesbrough’s players must have felt the same when they came down, finishing in 11th place that year. Since then they have finished 12th, 7th and 16th.

There are a lot of big clubs in the division who are desperate to get into the Premier League. Some have been so desperate that they have thrown financial stability to the wind. However, Latics have an owner who insists on sound financial management, despite the criticisms aimed at him by some fans.

Is Dave Whelan right to run the club in such a manner?  Or should Latics go the way of so many other clubs who have dropped down from the Premier League and use their parachute payments to keep and attract the kinds of players who can get them back there?

Middlesbrough announced a pre-tax loss of £13.5m for the 12 months up to June 2012. Like Latics they have a millionaire owner – Steve Gibson – who has written off so many of their losses over recent years. In fact during that same period there were five other clubs who posted bigger losses than them. The leader was Leicester with an after-tax loss of £29.7m.

For some time now Gibson has been writing off close to £1m a month to keep Boro up where they are. With the Financial Fair Play (FFP) rules due to come into effect this clearly cannot continue. The loss announced last March was based on revenue of £18.1m, with only £4.8m coming from gate receipts.

There has been so much conjecture over the years over Wigan Athletic’s attendances. Up to this point their average league attendance has been 15,284 – down from the figure of 19,375 last year. This year they will play 23 home games, compared with 19 in the Premier League. If attendances stay at the current level the aggregate over the season will fall short of that last season. Overall match receipts for league games this season are not likely to exceed £4m.

In the last two seasons Wigan Athletic have made net profits, £4.2m announced in 2011-12 and £822,000 in 2012-13, when increased wages kept profits down. However, last year match receipts covered only around 10% total revenue of £56.4m. It is the commercial sector, dominated by the television revenues, that helped the club compete in the Premier League.

In the 2011-12 season only five clubs in the Championship made a net profit. Net losses amounted to a total of £158m, an average of £6.6m per club. Cardiff City made a loss of £30m last season in moving up from the Championship division.

Lessons learned at Middlesbrough show that a club has only been able to live beyond its means if it has had a rich benefactor. However, FFP is going to limit the ability of a club to survive in that way. Boro are an old club, with a strong fan base, but their short-term future is starting to look bleak.  It is their fifth consecutive season in the Championship, each year having made considerable losses, with promotion a dim possibility.

The dilemma for Wigan Athletic is whether to pump funds into a big bid for promotion or whether to go for financial consolidation. Maybe the compromise will be somewhere between the two extremes. The dip in commercial revenues compared with the Premier League is huge.

With a large squad and a number of players on high salaries by Championship standards Latics will have to use a significant chunk of their parachute payments to make ends meet this year. If they do not get promotion this season we might well see more of the higher wage earners move on in summer. The squad size will reduce now that they no longer have Europa League commitments.

If they stay in the Championship Wigan will have a comparative advantage over most of their rivals for a couple more years. However, each year more teams will be coming down from the Premier League with parachute payments in their pockets and the extra funding for Latics will have a finite lifetime. One only needs to look at what has happened to clubs like Middlesbrough to see what can happen.

Promotion to the Premier League is a priority for Wigan. The commercial revenues there would make it easier for them to survive financially. Rosler is going to have to look for bargains if they stay in the Championship. Given the aforementioned factors Dave Whelan will not be able to dip into his pockets in the same way he did in the past.

The balance sheet at the end of the year will make interesting reading.

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