January 2022 Transfer Thread

[The Saturday Boy]

If this is true then it's because we paid the Fabio money all up front and a few weeks later took the Jota money in back end loaded payments. We are now having to pay interest on unlocking that money, that's not good business. That's even before judging the merits of the deals themselves.

Swings and roundabouts even if your assumption is true. The money owed on Jota was spread over a number of years which is quite common, but that also means those instalments are worth less due to rising inflation. Borrowing in business is normal and while we can’t know the ins and outs of our financial dealings there doesn’t seem to be any red flags that would suggest there are any imminent or underlying issues.

It seems clear that Wolves are not operating the same way as Manchester City or Everton with transfers effectively funded by benefactors and unless that changes, which is entirely at the whim of the owners, we operate as a self funded business. We can’t do that and spend £300 million on transfer fees.

Comparing one transfer to another and then making a judgement is harsh - any transfer carries an element of risk so matter how the transfer fee is structured as it is based on the performance of the player. We sold Jota, who had a number of years experience, including in the top flight, to a club with players significantly better than ours…Jota has performed well. We bought a player with no experience at all in comparison - chalk and cheese.

 

[The Saturday Boy]

As has been stated above, it makes no sense why cashflow is so poor. Our wages to turnover ratio is (was) low. Unless we’ve given the whole team 50% pay increases then we should be pretty good in that regard.

Obviously if our cash flow is poor from transfer activity then that’s terrible management as the books have been balanced for a few years now.

Why do you assume cash flow is “so poor”? Cash flow in football is uneven and it may well have been factored into the Jota deal that at some point we would do exactly as we have done and borrow against future instalments. The Jota deal was also done before the impact of Covid was known on revenue streams.

We have agreed contract extensions for a number of players at a time when revenue has decreased so yes there will have been some recalculations going on particularly because previous projections will have been off by some magnitude.

This just seems a strange thing to try and use to criticise the club.

 

[Tony Towner]

I disagree. I'm not comparing the players, I'm questioning the inconsistent decision making. Based on what's been widely reported the Fabio deal was structured because Porto needed the money up front - I'm ignoring where 1/3 of the money went to. The Jota fee was higher if we agreed to back end load the payments, yet a percentage of that we are giving away to unlock the money earlier. All this happened post Covid and at a point large crowds weren't expected until post Xmas, so little material difference there.

 

[Del Woppio]

I think the point he's making is that the only feasible reason for having this loan would be that we're running low on cash. But we shouldn't be.

We've had deferred merit and TV payments, and a net zero transfer spend, and already had one the lowest wages to turnover ratios in the league. There's no obvious reason to need this £26m given the cash reserves we have

 

[The Saturday Boy]

I think the point he's making is that the only feasible reason for having this loan would be that we're running low on cash. But we shouldn't be.

We've had deferred merit and TV payments, and a net zero transfer spend, and already had one the lowest wages to turnover ratios in the league. There's no obvious reason to need this £26m given the cash reserves we have

We are doing what many other clubs are doing so why are we different to other clubs? You have to assume decisions are made on medium to long term projections and that includes cash flow. Covid will have had an impact on those projections. Rather than this being a sign of some impending crisis or mismanagement of the club…the more feasible reason is that this is a readjustment based on unforseen events that have had an impact which was unpredictable.

At the time, it was reported that Wolves were happy with the structure of the Jota payments as it provided regular income and from a club like Liverpool there was low risk of default. I certainly don’t know enough about the clubs current finances, the impact of Covid or their future plans to know for sure one way or the other…but I still don’t see how this is proof that the club is in any sort of trouble. It’s a choice and not a particularly expensive one considering the rate of inflation is devaluing these payments from Liverpool with each passing month.

 

[PuntsWolf]

I think the point he's making is that the only feasible reason for having this loan would be that we're running low on cash. But we shouldn't be.

We've had deferred merit and TV payments, and a net zero transfer spend, and already had one the lowest wages to turnover ratios in the league. There's no obvious reason to need this £26m given the cash reserves we have

Exactly this. If we had good cash flow we wouldn’t need a loan (we apparently aren’t signing anyone so there’s nothing else to need loads of cash for).

With the TV money coming in quarterly, tickets and merchandise still being sold (such a small % of our turnover anyway so not really a factor to need £26m, that’s like 15% of our turnover!?), so then where has the money gone?

 

[PuntsWolf]

It’s a choice and not a particularly expensive one considering the rate of inflation is devaluing these payments from Liverpool with each passing month.

They aren’t really “devaluing”. The money will be booked and that’s all that really matters. Yes £1 in your pocket will be worth more now than in 5 years, but that’s the same for all our other payments as well. And even if it was in our bank account (doesn’t sound like it would have been anyway as we’ve got a £26m hole) it’s not like we’d have been raking in interest.

 

[Johnny75]

It's certainly a strange decision on the face of it.

Fosun themselves are cash rich so could lend the money to the business on the same rates and as a business that would make far more sense than using an outside 3rd party like these vulture capitalists.

If it is cash flow reasons then what has happened to the deferred prize money, increased ticket revenue and deferred TV cash?

If it's for spending on infrastructure then I can understand it but why not have an all singing all dancing press release to say as much. The same for spending on players.

The club can't be stupid enough to realise the fanbase won't find out about this and be nervous. That's just bad PR.

It's not unusual to borrow and borrowing against future income isn't new, but why is it necessary given our accounts paint a very rosey picture year after year. Something doesn't smell right.

 

[Del Woppio]

Jeff: "What's the easiest way to get loads of supporters arguing *for* the fact we're going to spend no money this January"

Vinny: "Hold my pie"

 

[Johnny75]

I'm not sure this dead cat style of PR is going to work at our football club.

 

[Wilf Wolf]

Are Fosun taking income to reduce the debt from their original loan? If so the chances of retaining PL status long term with a reasonable chunk of income not being used to finance the club is low. Breaking even is an understandable approach but trying to progressively repay the debt rather than when they sell the club won’t end well.

 

[The Saturday Boy]

We posted a near £40 million loss in the last accounts against a projected profit of £18 million and the club said this was due to the impact of Covid. Taking the loan puts the club more or less back into a balanced financial state so as not to have any impact on projected future spending plans, whether that is on infrastructure or transfers.

There is a near £60 million difference between what the club projected and where they ended and there are other options, like player sales, that would have the same outcome but likely much more unpopular. If we take this loan and sell Neves, Traore and Raul next month then maybe it would be time for the clanging chimes of doom.

We already have a significant loan from Fosun on generous terms, no interest and no repayment date, which had a significant impact - promotion, Europe and consolidation - but they have never suggested there would be a never ending supply of money…indeed it has been the opposite with a stated intention of building a self sustaining football club.

 

[Del Woppio]

We posted a near £40 million loss in the last accounts against a projected profit of £18 million and the club said this was due to the impact of Covid. Taking the loan puts the club more or less back into a balanced financial state so as not to have any impact on projected future spending plans, whether that is on infrastructure or transfers.

There is a near £60 million difference between what the club projected and where they ended and there are other options, like player sales, that would have the same outcome but likely much more unpopular. If we take this loan and sell Neves, Traore and Raul next month then maybe it would be time for the clanging chimes of doom.

We already have a significant loan from Fosun on generous terms, no interest and no repayment date, which had a significant impact - promotion, Europe and consolidation - but they have never suggested there would be a never ending supply of money…indeed it has been the opposite with a stated intention of building a self sustaining football club.

That paper loss is more than wiped out in the coming accounts because of the deferred merit payments and TV money, they said so themselves in the statement. If we need £26m something has either gone really wrong, or the focus is paying back the debt to Fosun. We have (or should have) plenty of cash.

 

[AndyWolves]

Looks like we had 3 of these last year and another 2 this year.

Whilst I think there is a valid question around why we don't borrow from the mothership, is there an element of Fosun wanting to spread the risk around?

 

[PuntsWolf]

These accounts in March can’t come soon enough. We can knock the FFP, where’s the money gone and Fosun are taking money back out the club debates all on the head 10 minutes afterwards.

This years accounts will he far more favourable given minimal transfer activity and fans back in grounds. So less grey areas to debate over.

 

[AndyWolves]

I had a look at everton as an example of a bank rolled club and they have charges against them to lending companies.

 

[Tredman]

These accounts in March can’t come soon enough. We can knock the FFP, where’s the money gone and Fosun are taking money back out the club debates all on the head 10 minutes afterwards.

This years accounts will he far more favourable given minimal transfer activity and fans back in grounds. So less grey areas to debate over.

When are the accounts due? Very rare any company publishes account until the very last moment.

 

[Throbber3]

Starting to piss me off already. There better not be excuses this window.

 

[AndyWolves]

Starting to piss me off already. There better not be excuses this window.

I wouldn't have any expectations around January bar recalling some loans. That way you won't be disappointed!

 

[Sniffer]

When are the accounts due? Very rare any company publishes account until the very last moment.

31st March - 10 months after the year end.