Wrexham shows how one can make smart use of funds

Four years, two months and 18 days after Ryan Reynolds and Rob McElhenney announced their purchase of Wrexham, the club sealed promotion for a third season running.

A 3-0 victory over Charlton lifted one of the world’s oldest clubs into England’s Championship, only one league below the Premier League. Not bad for a team who were in the fifth tier, the National League, back in February 2021, having dropped out of the EFL in 2008, the natural consequence of entering administration three seasons prior.

If the story on the pitch has been loud and attention-grabbing, the one off it hasn’t been short of noise either. The club’s recently released 2023-24 financials, detailing the money behind their League Two promotion season a year ago, dropped jaws far and wide. Wrexham’s revenue last year hit £26.7million, a 154 per cent increase on their National League-winning year.

That is, to understate things quite a lot, not normal. Wrexham’s revenue last season set a fourth-tier record by a country mile; had the club been in League One, that level of income would have been the second-highest ever of any third tier club not in receipt of Premier League parachute payments, only (just) surpassed by Leeds United’s £27.4m in 2009-10.

Despite the enormous income, Wrexham still posted a loss last season, though their £2.7million pre-tax deficit represented a 47 per cent reduction on 2022-23. The £16.2m increase in revenue comfortably outstripped a wage bill rise that, while up 59 per cent, only comprised a £4.1m increase in monetary terms.

In the years leading up to the takeover, pre-Covid, Wrexham’s financial performance generally hovered around break-even. The exception came in 2018-19, when a sell-on clause of around £1.25m on the back of former goalkeeper Danny Ward’s move from Liverpool to Leicester City pushed the club into profitability, but even that was only to the tune of £0.8m.

Covid depleted income and increased losses, though the real trigger for the latter was the arrival of Reynolds and McElhenney. In their first full year in charge, losses more than doubled. Then, a year later, they leapt higher still, as the National League promotion season brought with it a £5.1million loss — by far the biggest loss in the division that year and 85 per cent higher than next-worst Notts County (£2.8m).

To put last season’s £2.7million loss into context, only one League Two club, Newport County, booked a profit in 2023-24, and that was just £25,000. All of the remaining 20 clubs to have published last year’s financials (three are still to do so) posted a loss, and six of them booked a higher loss than Wrexham.

Promotion cost Wrexham £0.8m by crystallising player bonuses and transfer fee add-ons; without those, their pre-tax result would have been better than two further teams. The worst financial result in the division came from Stockport County, who finished one spot ahead of Wrexham as League Two champions, incurring a £7.0m loss in the process.

Reynolds and McElhenney actually bought Wrexham in 2021 for a peppercorn (£1) from the supporters’ trust, though that did come on the proviso that they would inject at least £2million into the club. Within their first five months of ownership, they’d provided £2.2m in equity funding and, by the time promotion from the National League had been achieved, the duo’s direct funding of the club topped £12m. By that point, at the end of June 2023, Wrexham owed their owners £9.0m in interest-bearing loans.

As a result of the club’s increased income, the need for shareholder funding declined last season. £1.7m in 2023-24 was the lowest cash input in a season since the takeover. By the end of June 2024, total funding since the takeover sat at £14.1m, with £10.7m sat on Wrexham’s balance sheet as debt, incurring interest at three per cent over the Bank of England base rate (which was 5.25 per cent at that time).

The 2024-25 season saw some significant changes in both the amount of owner funding Wrexham received and its source. Wrexham Scope is owned by the billionaire Allyn Family, who took a minority stake in the club in October 2024. In the same month, £11.3million in equity was raised by the club, and while the exact make-up of the source of those funds is unclear, later events are instructive.

Across the current League One season, a total of £28.7m in equity has been raised, with £15.0m of that going towards paying off loans due to R.R McReynolds. The remaining £13.7m has been used to fund operations, including an increased wage bill and heightened transfer fees, as well as to assist in the cost of building a new Kop Stand alongside other infrastructure improvements (£1m will be spent on a new pitch this summer). There’s likely now more cash to help this summer’s squad rebuild, too.

Wrexham are now free of shareholder debt, so their strengthened balance sheet can more favourably raise financing for any future projects. From Reynolds’ and McElhenney’s perspective, they have made back most if not all of the funding they’ve provided to date and are sitting on an asset worth several multiples its value of just four years ago (though that valuation currently still rests on the pair’s continued involvement). Future minority stake sales look likely. Per Wrexham’s Strategic Report: “Further partners would be considered, if they can add value and assist in the delivery of our objectives.”

Last season’s £26.7m turnover wasn’t just a League Two record and wouldn’t just have been the second highest ever income for a non-parachute League One club, it was actually more than 11 clubs in the Championship, two divisions higher.  Boosting commercial income has been a stated aim of football clubs for a little while now and Wrexham’s proportion of commercial revenue to total revenue was by far the highest in the country last season at 74 per cent.

Wrexham’s commercial revenues in 2023-24 were £19.7m, a frankly enormous figure for a fourth-tier club. So enormous, in fact, that it outstripped five Premier League clubs, never mind those in the Championship and League One. Wrexham’s commercial income was the 19th highest in England last season, a statistic that underlines how impressively the club has been marketed and how successful the Welcome to Wrexham documentary has been.

Wrexham will now enter their fourth consecutive season of having different profit and sustainability rules (PSR) to abide by. In the National League, there were no rules; in League Two, they were required to keep salary costs to 50 per cent of turnover; in League One, that jumped to 60 per cent; and in the Championship, soft salary caps are done away with and clubs are instead limited in the amount of money they can lose, after deductions for allowable expenditure.

Some fans say that Wrexham have ‘bought’ promotion.   Money does, of course, talk in modern football, but this is more a case of smart management seeing opportunities, in particular using the documentary to attract commercial income.   Wrexham has its economic and social challenges and the club has given it a great morale and attention boost.