Fosun’s Financial Prudence Leaves Wolves at a Crossroads

This week – with the help of a friend of mine who is much more of a numbers man than me – I took a look through Wolves’ recently published accounts. The main headline is that Fosun are backing losses to the 3-year £105m max. Love them or loathe them, that’s good, and in our case essential club stewardship. But it’s not all good news, and the numbers can certainly shed some light on the inner workings (or not) of the club.

Firstly, wages to turnover is tight at the 80% maximum allowable, but we are on the right side. Alongside PSR, we have to observe the new squad operating limiting rules which restricts spending to 80% of turnover next year; this looks like they are preparing for it. Remember Villa are at 94% and closest to the edge. They really are a boom or bust model. 

Fans will have their own ideas about what they’d prefer to see the owners do in this respect, but Fosun have always played it cautiously when it comes to meeting new rules and regulations. 

The steep decline in spending, despite probably having ulterior motives, when we were at risk of breaching PSR rules demonstrated this. Fosun are, if nothing else, inherently risk-averse when it comes to the financial side. They don’t want penalties, they don’t want sanctions and embargoes, and they certainly don’t want points deductions – which could be the end of us. 

Such steadfast risk aversion, however, must be balanced with adequate investment in the quality of the squad, otherwise you are taking a massive risk anyway. Recruitment simply has to be spot on going forward. Which begs the question, do we have the internal infrastructure necessary? A Brighton or Brentford style recruitment strategy built on deep worldwide scouting networks and ratified with data? 

Brentford spend £8m per season working alongside universities on football research and data accumulation, which is testament to how seriously they take the ‘money ball’ model. Do we pay it such credence, or are we winging it? If it’s the latter, which most suspect it is, it will catch up with us eventually. 

Ironically, a self-sustainability model built on the core principles of canniness and frugality in the transfer market takes a whole lot of canniness to carry out – and canniness doesn’t come cheap. It comes in the form of highly paid individuals who have been there and done it. Those who have proven they have nailed down the fine art of balancing business and football. Who currently ticks both boxes within the esteemed hierarchy at Wolves?

The longer we don’t address this, the further we fall. And the more fantastical our self-sustainability ambitions become. For an idea of how far we have already fallen, Brighton – who were several places higher and in Europe last season – earned £60m more income in the latest books. 

We’ve fallen further still against rivals we were undoubtedly in a far better position than 2-4 years ago. This season, Palace, Fulham, Bournemouth, and Forest are likely to earn between £15-30m more than us. It’s a slippery slope. But it all comes down to recruitment. 

PSR restricts us from spending our way back to success, regardless of Fosun’s wealth (even if they did miraculously opt to open the purse strings). We have to be canny, we have to buy and sell at the right times, we cannot afford ‘duds’ – every signing, especially those over £10m, must be hits. Then the real jewels in the crown come from those signed for next to nothing at 18 from abroad who emerge as stars. We don’t see enough of these, yet they’re fundamental to the model the club is striving for.

Back to the accounts, it is important to note that they will have factored in the massive salary Julen Lopetegui was on, and the subsequent pay-off (which wasn’t cheap). 2024/25 should therefore be healthier despite another managerial dismissal. Gary O’Neil and his backroom’s salary and pay-off was a fraction of Lopetegui and co.’s. And it has been rumoured there were performance-related stipulations added into his new contract, so it may not have ultimately been too financially damaging to depart with O’Neil. This is positive, but in hindsight does raise the question as to why a decision wasn’t made sooner. Something that could yet come back to bite Wolves this season. 

In reality, time was up for O’Neil post Brentford away. If his outstaying his welcome wasn’t about money and the commitments the club had made in his renewal, what was it about? This brings us back to the potential lack of footballing acumen amidst the top brass.

Match day income, and I hear the fans’ outcry, is low. We have one of the highest numbers of season ticket concessionary blocks in the Premier League, and 3rd lowest spend per capita on match days. No wonder we welcome/need South Korean fans; from Fosun’s perspective, their spending gives us a much-needed boost; after all, it is likely far higher than the average fan on a match day. 

For example, I myself don’t really go near the club shop on match days. International fans, I’d imagine, do. It’s a cultural thing for local fans; we don’t really need to spend anything more than what it costs to get in the ground to get what we need out of going to support Wolves. It’s difficult to see how that can change, but further hikes in ticket prices will certainly not be the answer. It’s those very fans still filling the stadium, and evidence this season has proved there is not enough demand or sentiment from neutrals and/or fans afar to consistently fill the void high prices create. Fosun are now running the risk of ripping the heart out of the club in that respect.

Lots of clubs are hiding behind PSR – Spurs, Arsenal, Liverpool etc. – but in reality, they are showing true business colours. Boardrooms want profit or at very least to minimise losses. With Wolves, PSR is an issue because we don’t generate sufficient revenues – but not quite to the extent suggested by the owners and the local reporters/newspapers.

Next year we will lose the 22/23 £47m losses, which should give us more headroom this summer. It suggests we more or less spend what we earn but underlines the importance of selling big players (at the right time, and for the right price) and replenishing well in the summer. 

There’s a lot at stake; a pretty big squad rebuild looks on the cards. Are we astute enough to pull it off, or will we get strong-armed out of demanding top prices for our outgoing assets by so-called ‘big clubs’ and evermore influential players and agents (Cunha and his £62.5m buyout, case in point)? When it comes to incomings, will we be sold down the river and/or caught out bargain hunting again? We can ill-afford either. 

And all this is assuming we are still in the Premier League. The prospect of us not being doesn’t bear thinking about; it’s curtains, oblivion, game over. None of what I have written up until now will matter. Rip it up and start again. Put plainly, we cannot go down. Financially, it’s torrid; income is a drop in the ocean compared to the top tier. We all already know this too well. Look at the gap beginning to emerge in quality between the Premier League and Championship. The best three in the Championship can barely compete season on season. 

If you drop down once, just once, you join that glut of teams in purgatory, possibly indefinitely. How can I be so sure? Leicester and Southampton were both established Premier League clubs, who spent a single season without a seat at the big money table, and look at them now.

Finally, being part of a multinational conglomerate, I think it helpful context to read across the global group accounts. Ultimately, our circumstances are linked to the group’s situation. However, for the first time in recent years, Fosun International are looking very healthy. They’ve junked non-core assets and raised £8bn to reduce group debt and generate cash to invest in core ventures. Also went from a negative credit agency rating from Moody’s to a double AA (same credit agency that issued a double negative rating on Jim Ratcliffe’s Ineos last week). You can’t infer too much, but my guess would be this will be good for Wolves. Coupled with this, Xi has released the hold on the private sector. Lots of stimulus being given to help revive the economy. We can live in hope. As ever.