1.) 25 Oct 2024
25 Oct 2024 14:24:18
Hi to everyone and in particular the future is gold
I probably have not expressed myself as clearly as I could in the last post so I will try and clear this up. Obviously amortisation costs are part of the total costs but they should be viewed as in a separate cost centre.
Football cubs at least premiership clubs are now big business and should be run as such. One key component of this is to break the business into key cost/profit centres. I have spoken to contacts I have in the football industry ( not at Wolves) to obtain a hopefully clearer explanation for this.
Cost centre 1 is general trading ie income less wages repairs etc.
Cost centre 2 is player purchases and sales.
Cost centre 3 is the academy but this is sometimes merged with cost centre 2.
Over a period of time which could be 3 years or 5 years cost centre 2 should either break even or have a small loss. To do this profit on player sales should be about equal to the cost of amortising transfer fees.
So to answer the question how can we buy anyone if our profit in cost centre 1 is only £4 million this is not the source of transfer fees in well run clubs. I asked my contacts for an example of this and Brighton were suggested as probably the best example. In the 3 years to 2023 Brighton's income from player sales exceeded amortisation costs by £47 million you may recall Wolves had a comparitive loss of £90 million. So by better management of this cost centre Brighton have £137 million more than Wolves to invest in the team.
To be fair to Wolves the figures for them are before the sales of players in the summers of 2023 and 2024 so I expect in the next 2 years the figures in this cost centre should be much better.It is a pity previous losses are probably inhibiting investment in the squad but this is the point I have been trying to make Wolves big problem is the recent losses in this cost centre.
As a diversion I asked at what point successful clubs in this sector look to replace players they have sold at a profit. The answer is as soon as the recruit is seen to be an asset for the first team and also a potential sale at a substantial fee the scouts are instructed to identify potential replacements so if the player is sold the replacement is already lined up. Usually the replacement will be from abroad or if in the UK probably from the championship so the target replacement will see the move as a step up and therefore likely to want the move.
So to conclude although increases in general revenue eg better sponsorship deals would be great for Wolves to avoid problems with profit and sustainability rules the key improvement has to be in cost centre 2. The summers of 2023 and 2024 may well have sorted this out but the key to success on the field lies in the recruitment of players. Brighton can do it why can't Wolves?
Very final thought Forest had the worst record from conceding goals from corners and set pieces last season, this season no goals conceded so far. Why a new centre back signed for less than £20 million. How did they find him when we apparently could not find a suitable replacement for Kilman?
Wolves1960