Football finance expert: Wolves may have to be a little bit cautious this summer

The club’s accounts for the year up to May 2021 showed they made a profit of £18.4m, despite losing almost £19m due to the pandemic.

Although Wolves’ accounts look much healthier in comparison to some other clubs, expert Maguire is exercising caution due to the funds Wolves still owe for transfers – though the club are also still owed £64m in player sales.

“Going forwards Wolves have cash in the bank, which is always useful when it comes to paying the regular bills,” he said.

“They do owe a lot of money in transfers, which is reflective of the modern football world and that the vast majority of deals are done on credit.

“Fans might get excited that the club has made a profit and can go out into the transfer market, but you have to be a little bit cautious because they already owe £110m in existing transfers and outstanding instalments.

“It’s a bit like your credit card. Just because you’ve not spent anything this month does not mean you can spend a fortune on it if you’ve already got an outstanding element on your account.

“That’s something to be broadly aware of, that they have funded the investment of players on credit, and that will slightly dampen their ability to spend money in the future, especially as Fosun seem keen on Wolves to be sustainable.”

Owners Fosun also effectively wrote off £126m in loans, which the club described as a ‘show of commitment’. Although it certainly helps the club, Maguire believes it is not quite as significant as it seems at first glance.

“In respect of the debt write-off from Fosun, while it looks like a spectacular number and does give a big boost to the accounts, I wouldn’t read too much into it,” Maguire added.

“It’s an accounting technical issue and the club realistically would never have been in a position to repay those loans.

“The write-off of the loan, to a certain extent, is just being practical.

“Wolves were never going to have £126m in cash to pay back Fosun and Fosun were never going to ask for the money back. They’ll recover their investment in Wolves should they ever choose to sell the club.

“This tidies up the balance sheet and makes it look a bit more presentable. If the club is being scrutinised by potential lenders then at least there’s one less loan for them to identify as a cause for concern, and that’s about as far as it goes.”

Wolves have taken out several loans with Australian financial services giant Macquarie Group, and most recently took out two secured against the instalments due from the sales of Diogo Jota and Matt Doherty.

It is a common move for Premier League clubs to help manage cashflow and although they will will pay interest on it, Maguire says Wolves have been given a smaller interest rate due to their strong position in the league.

“Wolves have borrowed from Macquarie and the interest rate of 7.18 per cent is significant but it’s still lower than we’ve seen at some other clubs, who are paying nine per cent or more,” he said.

“That probably reflects the assessment that lenders have in terms of risk. The biggest risk for a football club such as Wolves is relegation, so this is probably testament that lenders think Wolves is a lower relegation risk than some of the other clubs that the senior football lending banks have been giving money to in the last year or two.”

Overall, financial accounts can be difficult to digest for supporters concerned about the future of their club.

But Maguire has again exercised caution on the latest figures due to the pandemic – but believes Wolves are in a fairly strong position.

“A lot of caution has to be taken before drawing too many conclusions from the accounts because in 2020 Wolves only played 32 Premier League games,” he said.

“The club was affected by the closedown and in the period from June 1, 2020 to May 31, 2021, they ended up playing 44 games.

“This means that the TV income in particular is very distorted. It’s better to look at the two years overall and the TV money effectively doubled over those two years as a result.

“Wolves was hit by the closedown, as were all clubs. We’d expect in a normal year gate receipts to be in the region of £15million and that will bounce back in 2022, which is good news.

“Sponsorship income held up well, which is to be applauded and the club has good commercial partners as well.

“Wolves lost around £700,000 a week from their day-to-day trading, but there’s two ways to cover those losses and that’s through player sales or owner investment. In terms of player sales Wolves did very well, with Diogo Jota and Matt Doherty, meaning they more than covered it.”