Threat of financial calamity removed from Baggies

West Bromwich Albion had effectively been in decline ever since the club was sold to a Chinese consortium in August 2016, paying a figure north of £200m to buy former owner Jeremy Peace’s stake.

Controlling shareholder Guochuan Lai’s ownership was fairly disastrous for the club, but his unloved tenure finally came to an end after Bilkul Football WBA, a company ultimately owned by Florida-based entrepreneur Shilen Patel and his father Dr Kiran Patel, acquired an 87.8% shareholding in West Bromwich Albion Group Limited, the parent company of West Bromwich Albion Football Club.

This change in ownership was urgently required, due to the numerous financial problems facing West Brom, including growing high-interest debt and serious cash flow concerns, following years of no investment from the former owner.

Indeed, West Brom’s auditors had already rung the alarm bell in the 2021/22 accounts when they cast doubt on the club’s ability to continue as a going concern without making player sales, “Should the forecasted player trading not be achieved, the group would need to both maintain existing and find further sources of investment in order to bridge its cashflow position until appropriate player transactions are fulfilled.”

However, the good news is that there is no such comment in the latest 2022/23 books, thanks to the arrival of the new owners, as the club noted that a funding agreement has been agreed with the EFL to 30 June 2025.

Following the takeover, the new owners have repaid the £5m loan to Wisdom Smart Corporation Ltd, a Hong Kong based company controlled by Guochuan Lai, which was originally justified by Lai using the argument that his “international business suffered” during the COVID pandemic.

In 2022/23 West Brom swung from a £5.4m pre-tax profit to an £11.0m loss, as revenue dropped £8.7m (13%) from £65.4m to £56.7m, exacerbated by profit from player sales falling £10.4m from £16.9m to £6.5m, while operating expenses only reduced by £1.7m to £75.5m.

The main reason for Albion’s £8.7m revenue decrease was a reduction in parachute payments in the second season after relegation from the Premier League, which led to broadcasting falling £8.5m (16%) from £51.6m to £43.1m.

Indeed, the loss in 2023/24 is likely to be even higher, as they will no longer benefit from parachute payments with Patel indicating a “significant deficit”, as this was the club’s first season without Premier League monies in 22 years.

Like many other clubs, West Brom have become increasingly reliant on player sales, generating £67m profit in the last five years. During this period, they have made more than £10m on three occasions, including £29m in 2019/20, mainly thanks to Salomon Rondon to Chinese club Dalian and Jay Rodriguez to Burnley.

However, last season’s figure will be very low, as the only sale for decent money was Taylor Gardner-Hickman to Bristol City. Accelerating the O’Shea sale helped the 2022/23 accounts, but had the opposite effect on the following season’s figures.  It will be interesting to see whether Albion try to balance the books by making money from player sales this summer or decide to hang on to their talent to boost their chances of promotion.

Despite the reduction in revenue, West Brom’s wage bill actually rose £3.5m (8%) from £42.4m to £45.9m, as the club decided to retain as strong a squad as possible. The increase was also driven by additional new first-team players and the replacement of Steve Bruce and his coaching staff. This means that wages have basically halved since the £92m all-time high five years ago in the Premier League.

In 2022/23 Albion’s £46m wage bill was the fifth highest in the Championship, only below four other clubs with parachute payments: Norwich City £56m, Burnley £54m, Watford £49m and Sheffield United £48m.  However, the wage bill is likely to have been much lower last season after the departure of a few players on free transfers and loans, even if those deals did not generate much money in terms of player sales.  West Brom were fifth highest in both wages and revenue in 2022/23, which was also where they finished in the league the following season.

Lai and his colleagues did not provide any funding to the club for ages, either because they were unwilling or unable to do so. In fact, in the last five years there was actually an outflow of £5m.  Many clubs’ owners have provided substantially more funding than Albion’s, as the Championship is a division that has an endless appetite for shareholder support. For example, in the same 5-year period, nine clubs received more than £50m, albeit with varying degrees of success, led by Reading and Bristol City.

As parachute payments have ended, life has become more difficult for West Brom in the Championship. Their £11m loss in 2022/23 was not out of the ordinary for this division, though things are likely to get worse before they get better financially.

That said, the change in ownership does deliver some hope for the future, bringing Guochuan Lai’s miserable tenure to an end. This should have removed the threat of financial calamity, but it will still be tricky to find the right balance between sustainability and having a competitive squad, especially as several players are out of contract this summer.

This famous old club at last appears to have committed ownership, which will be important as Albion strive for promotion. Patel emphasised the new sense of togetherness, “For the first time in a long time, there is an opportunity for us all to be together as we embark on a new season, pushing as one for the collective good of the football club.”

However, it will really help if Albion manage to hang on to Corberan, who has made a significant difference since his arrival, even though his success has surely attracted the attention of a number of suitors.