Wolves accounts explained: £67m loss and what it means for FFP rules

The bottom line had been telegraphed a long time ago.

So the most eye-catching figure in Wolverhampton Wanderers’ 2022-23 accounts — a loss of more than £67million ($84.7m) — will have come as no surprise to anyone who follows the club closely.

There are reasons the club’s losses shot up from an already significant £46million in the previous year. Some are obvious, others are less so.

But there is also some good news for Wolves supporters. They already knew their club had avoided any threat of sanction under the Premier League’s profit and sustainability rules (PSR) this year alongside Nottingham Forest and Everton, who have both been referred to an independent commission. But Wolves’ financial forecasts mean the club are also confident of remaining in the clear next year, too.

So, while there remains much clawing back to do from the unattractive set of accounts made public today by Companies House, there are reasons for optimism that Wolves are heading in a more sustainable financial direction.

What is in the 2022-23 accounts and what do we know about the context?

The loss of £67.2million came from a turnover of £168.6million, relatively stable from the £165.7m income in 2021-22, when the loss was £46.1m.

The increased loss was due mostly to a rise in operating expenses from £223.9million to £269.2m. Amortisation — the accounting practice that reflects the decreasing ‘book value’ of players as their contracts run down — rose from £60.1m in 2022 to £79.2m.

Total wages rose from £104.5million to £123.8m. A total of £14.5m of the increase came in the non-playing staff, due largely to the change of manager from Bruno Lage to Julen Lopetegui. Not only was Lopetegui’s salary considerably higher than Lage’s, but the club had to agree to a settlement deal with Lage and his staff, meaning they were effectively paying two management teams for part of the year.

Lopetegui left Wolves in August (Tony Marshall/Getty Images)

The club made a loss of £38.6million on player trading, which included £43m to turn Matheus Cunha’s loan from Atletico Madrid into a permanent transfer. It was previously believed that the Cunha fee — a Wolves record — was paid last summer, in the previous financial year, but it was paid in February 2023 so fell within the 2022-23 financial year.

Other signings included Matheus Nunes, Goncalo Guedes and Nathan Collins. Hwang Hee-chan’s loan from RB Leipzig was also turned into a permanent transfer. Player sales, including Morgan Gibbs-White’s departure to Nottingham Forest, raised £43.9million.

The extra operating expenses also included a rise in interest rates, with Wolves refinancing in September 2022.

What does the future look like and where do Wolves stand on PSR?

The combined losses from the two years from 2021 to 2023 amount to £113.3million. That figure might ring alarm bells for supporters given the total permitted loss to stay within the Premier League’s PSR rules is £105m over three years.

But the PSR rules include provisions for ‘allowable expenditure’, so money spent in areas such as stadium and training-ground improvements, investments in women’s football and youth and community work are not included in PSR calculations.

For instance, Wolves’ current forecasts for the 2023-24 season predict a loss of £39.7million, but when allowable expenses are removed from the equation, it would leave Wolves with a predicted loss of £22m for PSR purposes.

When allowable expenses are taken into account, current predictions would leave Wolves staying within the £105million limit by £2.7m for the three years ending in May 2024.

Their ‘headroom’ had been predicted to be around £5million but was reduced when they settled on Jonny Otto’s contract in January following the training ground incident that saw him removed from the first-team squad.

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There is optimism that Wolves are heading in a more sustainable financial direction (Mike Hewitt/Getty Images)

However, Wolves’ forecasts were based on a worst-case scenario of a 17th-placed finish. Gary O’Neil’s side currently sit ninth in the Premier League table.

Each place is worth an extra £2.8million in merit payments and, in Wolves’ case, a net income increase of around £1.8m per place once performance-related player bonuses are taken into account.

So the better-than-expected on-field performance, plus more money than was anticipated from live UK TV games, means Wolves should stay within PSR rules more comfortably than the baseline forecast of £2.7million.

What else do we know?

Wolves owners Fosun loaned the club a further £64million in 2022-23 with that loan due to be conveyed to equity in the next few weeks.

That money is not factored into PSR calculations as PSR is designed to prevent owners from bankrolling clubs.

Fosun has provided another loan worth £18million in the current financial year.

(Top photo: Naomi Baker/Getty Images)

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