Wrexhams accounts explained: Welcome to Wrexham plan and TikTok sponsorship -

The records keep tumbling for Wrexham.

Saturday’s victory over Oldham Athletic took the Welsh club to 100 points for the first time in their history, while the 105 goals racked up by Phil Parkinson’s men is an all-time Vanarama National League record.

Off the field, it has been a similar story, with the accounts for Ryan Reynolds and Rob McElhenney’s first full season at the helm revealing how turnover soared by 404 per cent to almost £6million, another record for non-League football.

These soaring income levels, however, couldn’t prevent Wrexham from posting a loss of £2.9million, much of which was down to a hike in player wages and football costs as the club chased promotion to the EFL.

The figures also reveal how the joint owners, via The R.R. McReynolds Company LLC, had loaned the club £3.67million, primarily to fund the purchase of the freehold to the Racecourse Ground. Another £1.2million was invested in the form of shares.

So, The Athletic has taken a deep dive into the club’s accounts to answer some of the most pressing questions… including whether promotion to the EFL and being subject to the League Two spending restrictions in 2023-24 will mean a need to rein in the spending.

First up, what period are we talking?

The latest accounts cover the year to June 30, 2022 — so, basically, the first full season with Reynolds and McElhenney at the helm. This was a campaign that saw Wrexham finish as runners-up behind Stockport County.

Defeat to Grimsby Town in the play-offs meant there was no fairytale ending to the Hollywood owners’ first full year. Included in this financial period is the purchase of the Racecourse Ground in a £2million deal from Wrexham Glyndwr University, meaning the club owned its home for the first time since August 2011.

Not included in this accounting period is the impact caused by the Welcome to Wrexham documentary, which first aired on Disney+ in the UK and FX in the United States during the autumn of 2022.

What are the headline figures?

Apart from the already mentioned annual loss of £2.9million and £6m in turnover, you mean? Well, breaking down that revenue figure, matchday income accounted for £2.65m in 2021-22 and retail income £1.3m.

Sponsorship and advertising also brought in £1.05m. All were substantial rises on the 2020-21 campaign, which saw the gates to the Racecourse remain closed throughout due to COVID-19 restrictions.

Football costs were also up significantly to £3.94million, a rise of 294 per cent. This figure includes all football expenses, ranging from player and staff wages through to travel costs for away matches.

Paul Mullin has fired Wrexham to a record-setting amount of goals (Photo: Peter Byrne/PA Images via Getty Images)

Wrexham’s directors opted not to include a full profit and loss breakdown in the accounts, so a definitive wage bill figure is unavailable. However, episode 11 of Welcome to Wrexham features Shaun Harvey, the advisor to the board, telling McElhenney the additions in the 2022 January transfer window will push the annual wage bill to “around £2.3 million”.

It is understood this figure rose further during the final few months of last season due to a couple of players negotiating new contracts, leaving the club with a wage bill of £2.5million. Staff numbers across the club rose from 80 to 195.

Delving a little deeper into the accounts, Wrexham spent £1.2million on players during the financial year, a sum that includes transfer fees and agent fees (up from just £10,000 in 2020-21). The club’s record transfer fee was broken when Ollie Palmer joined from AFC Wimbledon in the January window for £300,000.

Had promotion been achieved last season, the club would have been liable for an additional £250,676 under the terms of those transfer deals, the extra payments being due to both the players involved and the selling clubs.

Amid such big numbers, perhaps the most reassuring aspect for supporters is that Reynolds and McElhenney consider themselves to be only getting started “in this wonderful place we have taken to our hearts”.

Does the club pay interest on the £3.7million in loans from the owners?

It does, yes. At three per cent over the Bank of England base rate, which at the moment stands at 4.25 per cent. This means the interest on the loans being paid currently is 7.25 per cent. In the financial year to June 30, 2022, the interest charged was £43,679.

“There is no immediate pressure to repay these loans that funded the purchase of the Racecourse Ground and stadium improvements,” says the directors’ report that accompanies the accounts.

Reynolds and McElhenney also ploughed a further £1.2million into the club in the form of buying up shares. Under National League rules, all money must be introduced as equity unless the intention is to spend on capital projects, such as stadium expansion or, as in Wrexham’s case, buying back their home ground.

How do Wrexham’s financial figures compare to the rest of the National League?

Pretty similar, to be fair. Stockport County, in winning last season’s National League title, posted a financial deficit of £4.8million in the year to June 30, 2022.

As for those left behind, Notts County, currently three points adrift of Wrexham in the table, lost £1.7million in 2021-22, while Woking and Chesterfield, third and fourth heading into Easter, lost £965,000 and £2.3million respectively last season.

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What will Wrexham’s balance sheet look like this season?

That’s the problem with the publication of any business accounts, they are invariably from at least nine months earlier and, in football, where on-field fortunes can change very quickly, painting an accurate picture of the current state of play isn’t easy.

This is particularly so for Wrexham, who, since the most recently published accounts, have been turned into a global sporting phenomenon by the documentary’s success.

What we can say with confidence is that the wage bill will have gone up. Phil Parkinson has again been busy in the transfer market, mainly signing players from the divisions above.

Ryan Reynolds, co-owner of Wrexham, greets home supporters (Photo: Michael Steele/Getty Images)

As was mentioned several times in Welcome to Wrexham, the club has had to pay a premium to get players who could otherwise have stayed in the EFL to drop down to non-League. That should, in theory, end the moment promotion is secured, but this season it will very much have been a reality.

Other costs will have risen amid the cost of living crisis, including energy bills. Happily, turnover is also likely to be up significantly from those record figures of 2021-22.

Matchday income, responsible for 45 per cent of last season’s total revenue, is likely to be up thanks to the ‘sold out’ signs regularly being posted at the Racecourse, not least because admission prices were raised last summer.

Retail sales will also reflect how the club sold out their entire order of 24,000 team shirts by the turn of the year. Such was the demand that 35,000 shirts have been ordered for next season.

Also likely to be on the rise is sponsorship and advertising, albeit not by too much due to the two-year deals that were signed with blue chip sponsors such as TikTok, Expedia and Aviation American Gin back in the summer of 2021 — and way before the impact of the documentary could be known.

Going forward, however, those agreements are likely to be much more lucrative, with the club now able to charge sponsors accordingly whose exposure has been off the scale.

Ah yes, the documentary. Any idea of a ballpark figure in terms of what the club earns from Welcome to Wrexham?

Nothing, directly at least. That was never the intention. Instead, the plan was always to use the global exposure to drive the club’s commercial operations, be that sponsorship, selling shirts and so on.

Following the phenomenal success of the show — something that is understood to have taken even the owners by surprise — Wrexham are now in a strong position when it comes to negotiating with any interested partners.

It is why Racecourse insiders describe Welcome to Wrexham as “the club’s biggest commercial asset”, even though club coffers do not benefit directly. That much is expected to become apparent in the accounts for the 2023-24 year when those sponsorship deals negotiated on the back of a successful first series will feature.

How would promotion change things on the financial front?

Revenue will go up immediately, even without a ball being kicked. All League Two clubs receive a central payment from the EFL of around £1.1million, covering their share of TV income/sponsorship and the annual Premier League solidarity payment.

This will be a seven-figure increase on what Wrexham receive currently as a member of the National League. Further TV payments could follow if the club’s matches are shown live by Sky, with £20,000 paid to the home team per game and £10,000 to the away side.

The EFL’s streaming service could also prove very lucrative, not least because the clubs whose supporters buy the passes bank the lion’s share of the money.

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Streaming was given the green light by the National League in December and Wrexham have proved hugely popular already. The only figures available so far cover the two months to February 7, with sales for matches involving the Welsh club raking in £225,000.

Once costs are taken into account, Wrexham’s cut is around 40 per cent — a welcome income stream but one likely to be dwarfed in the EFL thanks to their overseas army of fans not being subject to the UK’s Saturday 3pm TV blackout.

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This season, Bradford City, comfortably League Two’s best-supported club but whose appeal is largely domestic-based, expect to bank around £300,000 via the iFollow service.

League Two’s 55 per cent rule

Promotion will mean next season having to comply with the EFL’s Salary Cost Management Protocol, whereby League Two clubs are restricted to spending 55 per cent of turnover on wages.

Thanks to the club’s rapidly growing income streams, this shouldn’t be a problem. Even if this season’s wage bill at the Racecourse is, as it seems, in the £3-3.5million bracket, Wrexham would comply thanks to a turnover that already compares favourably to most in the fourth tier.

With Parkinson’s squad full of players who had previously played at EFL level, there is an argument to suggest not too many changes will be needed to make a big impact in League Two. Every manager, however, likes to refresh and Wrexham’s growing commercial revenue makes that possible.

At a level where the average wage bill stands at a little under £2million and even the most well-supported, like Bradford City, spent £2.3million on salaries in 2021-22, this increased spending power could prove pivotal.

Clearly, exciting times lay ahead if Wrexham can get over the line this season, not least with the new Kop stand due to open ahead of the 2024-25 season, which will add around 5,500 to the capacity at the Racecourse.

No wonder the directors’ report to accompany the 2021-22 accounts includes the line: “The directors do not feel we are anywhere near reaching the ceiling of the club’s potential yet.”

The expert’s verdict

Kieran Maguire, a lecturer on football finance at the University of Liverpool and the man behind the Price Of Football blog, tells The Athletic: “As financial results, these are fine as long as the owners continue to fund the club.

“They have been generous owners. They’ve put money in in the form of shares. At the same time, they’ve also lent the club money and are charging interest. That’s not always the case with owners.

“But what this allowed the club to do is spend over £4million on property assets. That is great, as it is setting the club up to become more independent and more sustainable. That can only be welcomed. I’m always happy when money goes into the infrastructure rather than, say, what Everton did by blowing it all on players.

“Wrexham are surfing the wave at present. They are 90 per cent certain to get out of the National League and I think they will be in a very strong position in the EFL League Two next year.

“The documentary is clearly central to everything. Welcome to Wrexham is great and the club benefits from that via those deals from TikTok and so on. I’d also say the show has a few more series left in it.

“Going forward, though, the big question for me is whether Reynolds and McElhenney can attract other investors who will want to continue the progress after being seduced by the Disneyfication of Wrexham. That will be key in the longer term.”

(Top photo: Lewis Storey/Getty Images)

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