Thread by @SwissRamble

Nothing should come as a surprise in football, but it was still a shock when Wigan Athletic entered administration this month immediately after the new owners, Next Leader Fund (NLF), took control. This thread looks at how this happened, including #WAFC latest financials.

First up, in November 2018, after 23 years as owners, the Whelan family sold #WAFC to Hong Kong based International Entertainment Corporation (ICE), a company that runs hotel and casino business in the Philippines, for £22m (price £15.9m plus taking on £6.5m loans).

More recently in June 2020, ICE sold #WAFC to NLF for £17.5m, giving ICE a nice £1.6m profit, plus the repayment of the £24.6m they had invested. However, the club was immediately put into administration, as a result of the new owners not putting any more funds into the club.

The obvious question is why would anyone decide to buy a football club during a pandemic, shelling out £42m in the process, but then decide not to fund its operations, thus putting it into administration? On the face of it, this makes no sense at all.

There’s also the tangled web of the ownership of the companies involved. Initially, NLF had the same majority owner as IEC, namely Choi Stanley, which is strange enough, before a minority shareholder, Wai Kay Au Yeung, suddenly became NLF majority owner (above 75%) in June.

There is also speculation, even mentioned by EFL chairman Rick Parry, that all this might have been driven by a large bet in the Philippines that #WAFC would be relegated, which would be facilitated by the club going into administration, as this leads to a deduction of 12 points.

Whatever the reasons, Andy Burnham, the mayor of Manchester, hit the nail firmly on the head, “Serious questions need to be asked about the EFL’s processes with the club’s new owner being approved just a matter of days before it was plunged into administration.”

One question would be what proof of funds did the EFL see? Although IEC said their £24.6m loan has been repaid, there is a loan agreement up to £29m, repayable within 12 months at high rates of interest (8%, rising to 20%), where lender and borrower happen to have the same owner.

Let’s now look at #WAFC most recently published financial results. These cover the 2018/19 season, when Wigan enjoyed “a successful campaign with our objective of securing Championship football achieved”, finishing 18th after being promoted from League One the previous campaign.

#WAFC loss widened by £1.6m to £9.2m, despite revenue increasing by £4.8m (73%) from £6.7m to £11.5m following promotion and profit on player sales rising £6.0m to £7.0m, as expenses grew £12.4m. Club said, “These results highlight the resources required in the Championship.”

Main reason for #WAFC £4.8m revenue growth was the higher TV deal in the Championship, which meant broadcasting more than doubled, rising £4.5m from £3.1m to £7.6m. There was also small growth in match day, up £0.3m (14%) to £2.4m, but commercial was flat at £1.5m

However, #WAFC revenue growth was more than offset by cost of competing in a higher division, as wages rose £7.7m (66%) to £19.4m, player amortisation nearly tripled from £1.1m to £3.2m, other expenses increased by £1.4m (43%) to £4.7m and no repeat of 2018 interest credit £1.2m.

As a technical aside, #WAFC 2018/19 accounts cover a 13 month period, as they changed their financial date from May to June to align with ICE. This would have increased losses, as it meant an additional month of expenses, but very little extra revenue.

While #WAFC £9m loss is not great, their performance was not too bad for the Championship, as only 7 clubs made money in this very competitive league. The largest losses were reported by the promoted clubs, #AVFC £69m and #NCFC £39m, partly due to hefty promotion bonuses.

However, it is worth noting that some clubs’ figures were inflated by once-off accounting profits from the sale of stadiums, training grounds and land, especially #DCFC £40m, #SWFC £38m and #AVFC £36m, so the underlying figures were even worse.

Excluding these property sales, only 5 clubs were profitable in the Championship with the highest profits of £11m posted by Bristol City and Brentford. On this basis, #WAFC £9m loss was actually the 10th best in the division.

#WAFC figures benefited from £7m profit on player sales, much higher than previous season’s £1m, mainly from Dan Burn to #BHAFC and #Will Grigg to #SAFC. However, still a lot less than large profits reported by Bristol City £38m, #Boro £33m, Swansea City £30m and Brentford £27m.

#WAFC have now posted losses in four of the last five seasons, though the total deficit over that period is only £19m, which is not bad for the Championship and League One. Worse than £3m aggregate loss from preceding five seasons, though four of those were in the Premier League.

#WAFC state “selling players at the appropriate time for an acceptable price is important for the club”, especially to “absorb the significant reduction in turnover” following relegation from the Premier League. However, only made £22m profit from this activity in last 5 years.

#WAFC operating loss, i.e. excluding player sales, increased from £10m to £16m, the lowest since 2010. As the club observed, their £9m pre-tax loss would have been “significantly higher” without the £7m profit generated by player trading. No major sales to speak of in 2019/20.

That said, only two clubs posted (small) operating profits in the Championship, so #WAFC £16m loss was actually the 7th best performance. As the board said, most clubs operate at a significant loss, due to high wages to turnover ratios and the rewards for achieving promotion.

Although #WAFC revenue rose £4.8m to £11.5m following promotion from League One, this was still less than half of the £25m the last time they were in the Championship two years ago, due to parachute payments stopping.

As the club pointed out, “the loss of this major source of income has had a detrimental effect on the financial results compared to recent years.” In fact, #WAFC £11.5m revenue is now around £45m below the £56.4m generated in last season in the Premier League (2012/13).

#WAFC financial challenge is highlighted by their £12m revenue being the lowest in the Championship. For some perspective, this was about a sixth of WBA and Stoke City (both £71m). The Board said, “There is a significant difference in resources of clubs in the Championship.”

Championship revenue is hugely influenced by Premier League parachute payments with 8 clubs benefiting in 2018/19, led by Stoke, Swansea and WBA £43m;followed by Hull City, #Boro and #HCAFC £35m; QPR £17m & #AVFC £16m. This makes life really difficult for clubs like #WAFC.

Even if parachute payments were excluded, #WAFC would still have the lowest revenue in the Championship, though the gap to the top club’s revenue would fall from £60m to £37m. That said, #LUFC £49m revenue was four times as much as Wigan.

#WAFC broadcasting income rose £4.5m from £3.1m to £7.6m, due to better TV deal in the Championship, including Premier League solidarity payment £4.6m and EFL central distribution £2.5m. Underlying increase was higher, as 2018 included £1.1m from reaching FA Cup quarter-final.

#WAFC match day revenue rose £0.3m (14%) to £2.4m, even though there were 7 fewer home cup games, as average attendance was up from 9,152 to 11,162, mainly due to increase in away fans. Despite the growth, this was still the smallest match day income in the Championship.

#WAFC average attendance was up to 11,162 following promotion, though crowds have been steadily declining since relegation from the Premier League, down around 40% (8,000) since 2012/13. One of the lowest in the Championship, only ahead of Rotherham United and Hull City.

Despite promotion, #WAFC commercial income was unchanged at £1.5m, which was the lowest in the Championship. For context, this was miles below the likes of #LUFC £27m, #AVFC £18m and Bristol City £16m.

However, #WAFC commercial activity has started to pick up. In 2018/19 Puma signed a 3-year kit supplier deal, while there were two new deals from 2019/20: gambling company KB88 replaced Fitness First as shirt sponsor (3-years), while Smurfit Kappa became back-of-shirt sponsor.

#WAFC wages increased £7.7m (66%) from £11.7m to £19.4m, due to “the cost of maintaining a competitive Championship squad.” As a comparison, £2.8m (17%) higher than last time in Championship two years ago. However, wages have more than halved since Premier League days (£44m).

Despite the increase, #WAFC £19m wage bill was one of the lowest in the Championship, only ahead of #ITFC, Brentford, Millwall and Rotherham. In fact, 11 clubs had wages more than twice as much as Wigan, including #AVFC £83m and Stoke £56m.

#WAFC wages to turnover ratio fell from 176% to 168%, which is far from ideal (third highest in the Championship), but this is pretty much the norm in this division, where 14 clubs are above 100%, much worse than UEFA’s recommended 70% upper limit.

#WAFC total directors remuneration increased from £98k to £339k, which was 10th highest in the Championship, though a fair way below Reading £1.5m. The payment for the highest paid director was £145k.

#WAFC player amortisation, the annual charge to write-down transfer fees over the life of a player’s contract, almost tripled from £1.1m to £3.2m, though this has fallen from a £13m peak in the Premier League, reflecting limited investment in the squad in recent years.

Unsurprisingly, #WAFC £3m player amortisation is one of the lowest in the Championship, only higher than #ITFC, #BRFC, Millwall and Rotherham. For more perspective, it was around a tenth of (relatively) big-spending clubs like Stoke City £29m and Swansea City £28m.

#WAFC spent £7m on players, including Windass, Garner, Kipré, Fox and Da Silva Lopes, which was around the same amount as the previous three years combined. However, they were massively outspent by Stoke City £67m, #AVFC £31m & #NFFC £23m.

#WAFC average gross transfer spend of £12m in last 4 years in the Premier League has halved to just £6m since relegation from the top flight. Averaging £2m net sales in that period. 2019/20 buys include Lowe, Moore, Robinson and Pearce.

#WAFC gross debt increased by £2.2m to £20.8m, though £4m bank loans were repaid. Comprised a couple of loans from the parent company, though current situation is unclear. Greatly reduced from £73m high in 2011 following conversion of £48m debt into equity in 2012.

#WAFC £21m debt was one of the lowest in the Championship, significantly smaller than the likes of #BRFC £142m, Stoke City £141m and #Boro £105m. Also owe £3.3m outstanding transfer fees, though are in turn owed £3.8m by other clubs. Contingent liabilities up to £6.1m.

Most Championship debt is provided interest-free by owners, which was the case with #WAFC parent company loans in 2019, though they paid £56k bank interest. Only 2 clubs paid more than £1m: Hull City £2.4m & Bristol City £1.0m. Unclear how much ICE charged for their loan in 2020.

#WAFC made a £7.4m cash loss from operating activities, then spent £4m on repaying bank loans, £0.4m on infrastructure, £0.2m (net) on players and £0.1m interest, which was covered by £12.7m net funding from the owners.

As a consequence, #WAFC cash balance increased by £0.6m to £0.9m, which was in the bottom half of the Championship. In fairness, 15 clubs in this division had less than £2m cash in the bank, so this was not exceptional (though not a great buffer in the current shutdown).

Over the last decade, various owners have provided £25m funding to #WAFC, boosted by £7 from (net) player sales. This was largely used to repay £10m bank loans and cover (smallish) £7m operating losses, while £4m went on interest, £2m capex and increase in cash balance £10m.

#WAFC have no issues with FFP. The calculation is complicated by the season in League One, but total losses are well within FFP £39m limit for Championship 3-year monitoring period, even before deducting allowable expenses for academy, community and infrastructure.

#WAFC do have plenty of assets. They own the DW stadium (shared with Wigan Warriors rugby league club) and the training ground, while they have plenty of playing talent, partly from their flourishing academy. Indeed, Jensen Weir has already been reportedly sold to #BHAFC.

The Supporters’ Club’s “Let’s Hang On” campaign has raised over £160k, while #WAFC continue to perform well on the pitch, so they currently sit in a comfortable 13th place in the Championship (before applying the points deduction), memorably spanking Hull City 8-0 this month.

The administrators have sent out 50 non-disclosure agreements to interested parties and are involved in detailed discussions with three prospective investors, including a consortium led by the Wigan Warriors owner, so hope springs eternal.

Many neutral supporters will wish #WAFC well, as they have ended up in this predicament through no fault of their own. Indeed, there has been much to admire about the club’s ability to beat the odds, despite having the lowest revenue in the Championship.