Annual Accounts Presented
Members of Wolves Fans’ Parliament received a full explanation of the club’s latest annual accounts at their final meeting of 2013 on Wednesday evening.
Two dozen members were present last night to hear Wolves’ Financial Controller Rita Purewal announce an operating loss of £5.7m on the year up to May 31, 2013.
This figure, she said, compared with a profit of £1.8m as disclosed 12 months earlier and takes into account ‘the negative impact of relegation.’
Chief Executive Jez Moxey, Club Secretary Richard Skirrow and Board Director John Bowater were also in attendance to help reveal how required accounting practice had led to the inclusion on the profit and loss account of ‘exceptional items’ such as the write down in value of the squad and the liability represented by what is left on some contracts. This was described as a prudent and sensible move to deal, in one financial year, with the impact of consecutive relegations from the Premier League.
These items amounted to a further £12.5m and £15m respectively that took the overall loss to £33.1m and left Jez admitting the club could be open to a bad press. But he was at pains to stress that the picture was nothing like as alarming as some might choose to portray it.
“This is not a cash loss but includes necessary provisions to reflect the position we find ourselves in,” he said.
Rita said the fact the club had suffered successive relegations and was ‘hugely relevant’ and added: “Financial governance is much more stringent now. We’ve made some very prudent and necessary provisions to get our house in order. We have to do this under UK accounting legislation.” John Bowater concurred saying the review and the resulting provisions had been an essential part of the audit process.
Richard Skirrow pointed out John’s strong background in accountancy and financial management and said that Deloitte were a major auditing firm who understood the football industry very well. “The practical differences in 2012 were that we felt we could be strong candidates to bounce back to the Premier League,” he said. “We were one of the leading candidates. This June, it was an entirely different situation with players having had two years of relegation with reputations not enhanced. Their market values needed re-assessing. We had to ask whether we were overstating their values.”
Rita, in describing the adjustments as ‘sound accounting practices’ pointed out that turnover had fallen to £32.1m from £60.6m, with most of the drop (almost £24m) because of the loss in central funding and broadcast revenue from the Premier League. Attendances were down as well from an average of 25,670 to 21,789 and the number of season ticket holders had fallen to 15,350 - a drop of nearly 2,700. This accounted for about £2m of the operating loss, she added, and the decline in commercial income represented the balance.
She outlined that the total operating costs, excluding amortisation, had dropped to just under £43m from £51m, and there had been a profit on player trading of just under £5m compared with a loss of £7.7m the year before. The latest financial year contained the sales of Steven Fletcher, Matt Jarvis and Michael Kightly, when the funds were utilised to buy Bakary Sako, Razak Boukari, Tongo Doumbia, Bjorn Sigurdarson and others. In many other industries, which may seem unrelated to football, provisions are often used on a routine basis.
“This draws a line in the sand under the past,” said Jez. “We’ve fronted it up and answered questions tonight. We’ve had a terrible two years.
“I hope this is the last time we formally talk about what has happened in the past. I’m a firm believer in looking forward. Naturally, they are disappointing financial figures but I don’t want them to derail the objective of getting promotion. Clearly, it has been an extremely difficult and challenging time for us inside the club and for our supporters.
“Steve Morgan pre-warned everyone in a media interview in September that these figures would not make good reading. We’ve had to take a very hard look at the accounts and take some difficult decisions, so we could look forward as positively as possible.”
The Chief Executive was at pains to point out, though that Steve remained ‘four square behind the football club.’ “We are continuing with our investments in our new academy at Compton,” he added. “The new facilities start to go up from January 6 and will be finished in September. We wouldn't be undertaking these projects if we didn't have confidence in our finances for the future.”
In answer to a question from Steve Phillips about the club being £20m down on four years ago, Jez maintained: “We’ve had consecutive relegations, which nobody expected. We are simply addressing those matters. It’s the reality of getting relegated.” Steve said that if this had been a meeting of shareholders, a lot more questions would have been asked. He suggested that writing off sums like this was huge considering the value of the club. Jez repeated what he had said even when pleasing financial reports had been issued in the past by saying: “I don’t think you can ever look at a football club’s accounts on a single year basis. The key point is how strong is the person backing the club? He's very strong. He wouldn't be backing the academy so much without being very confident for the future.”
Matt Grayson said: “We are dealing with human assets. Some of those values could go up again. We are making a sensible realistic assessment.” Jez said he didn’t want to start throwing out possible figures about the future.
Rita Purewal told Clive Smith that Wolves had two more years of parachute payments left and said agents’ fees were only a small amount on the balance sheet. In summary, Richard Skirrow admitted: “A serious review was called for and we have done it at a very prudent level. It’s not to be glossed over.....it’s not a very palatable set of figures.” Tom Bate was assured by Rita that similar provisions of this magnitude shouldn't be required again next year. He asked what the plan was regarding trying to break even or make a profit on the current year and Jez replied that the plan was to get promotion. “We are going to concentrate pure and simple on trying to achieve promotion, so we can create medium and long-term success for the club,” said Jez.
Simon Wade asked how the news would be managed and Jez said that the club would be posting a full article on their website this morning in addition to these minutes.
Greg Asbury said the figures showed how inaccurate some of the player fees – as indicated in the media – could be while Chris Bate wondered what Steve Morgan was getting out of owning Wolves. Jez said: “Like every other football club owner, I think he's a masochist. He is very wealthy and doesn't require Wolves for anything other than to give him a big headache. It's the ultimate challenge. He wants to develop and create a positive legacy.”
Jez added: “Steve has made a quite remarkable investment in Wolverhampton, not just within the football club and at Compton but also in projects such as the City’s new Youth Zone. He loves Wolves and believes that, as the owner, he should be doing other things in the community.” Matt Grayson added: “This is a Chairman in it for the long term and investing his money. You can't get much more compelling, consistent investment than this but until you achieve football success, the spotlight won't turn on it.”
Jez said no-one had got remotely close to taking the club on from Sir Jack Hayward until Steve stepped up, although Sir Jack was probably willing to sit down and talk three years earlier.