Financial sting for Hornets could be worse

The authoritative Swiss Ramble reviews the 2019/20 financial results for Watford that covered a season that the club described as “unique and challenging”, as it ended in relegation after they finished 19th in the Premier League and they had three managers: Javi Gracia, Quique Sanchez.

The Hornets swung from £10m pre-tax profit to £36m loss, as revenue decreased £28m (19%) from club record £148m to £120m and profit on player sales fell £4m to £18m, while expenses increased £9m (6%). Prior year boosted by £4.5m Marco Silva compensation.

During their time in the Premier League Watford reported profits in 3 out of 5 seasons, though there is an overall deficit of £49m in this period, due to the hefty losses in 2018 and 2020. In the Championship, they tended to lose money, though the losses were quite small.

One reason for the club swinging from profit to loss in 2020 is exceptional items. Prior year was boosted by £4.5m compensation for Marco Silva’s move to Everton, while 2020 was adversely impacted by £6.7m termination payments, presumably for Javi Gracia and Quique Sanchez Floresey.

The main driver of revenue reduction was broadcasting, which fell £24m (20%) from £119m to £95m, while match day dropped £2.0m (21%) to £7.3m, commercial decreased £1.2m (6%) to £17.4m and player loans were down £0.9m to £84m.

Even after the steep decrease in broadcasting income, this was still by far the most important revenue stream, accounting for 79% of total revenue followed by commercial 15%. This revenue stream was again one of the lowest in the Premier League, just behind Southampton. For perspective, this is over a quarter of a billion below Manchester United.

Despite the decline in 2020, revenue has still grown by £26m (27%) from £94m to £120m since 2016, their first season following promotion to the Premier League. However, it will fall again after relegation, despite parachute payments and TV money deferred from 2019/2.

The £36m loss is obviously not great, it is actually pretty good compared to others, as all clubs have been adversely impacted by COVID with no fewer than 13 in the Premier League posting higher losses in 2019/20.

The club listed the COVID impact as £10m lost revenue (broadcasting rebate £7.2m, match day £2.4m and commercial £0.3m), while the Swiss Ramble estimates that £17m TV revenue has been deferred to 2020/21. Excluding £27m reduction, revenue would have been £147m with the club posting a £9m loss.

The £28m revenue decrease is one of the better performances in COVID-impacted 2019/20 Premier League, though in percentage terms their 19%, is towards the upper end. Partly driven by accounting date, as this influences the amount of revenue deferred to 2020/2

Following the decrease in 2020, the £120m revenue was 17th highest in the Premier League, only ahead of Norwich, Villa and Bornemouth. To place this into perspective, it was less than a quarter of Manchester United’s £509m, highlighting the Hornets’ challenge in the top tier.

The bottom line benefited from £18m profit on player sales, down £4m on prior year, mainly from the sale of Lukebakio to Hertha Berlin, Foulquier to Granada and Oulare to Standard Liège. That’s not bad, but a fair way below Chelsea £143m, Leicester City £63m and Arsenal £60m.

The club have grown their profits from player trading, making £71m in the last five years, compared to only £19m in the preceding 5-year period. Indeed, 2020/21 figures will include £51m, mainly from Doucouré to Everton, Estupinan to Vilarreal and Suarez to Granada.

Watford spent £66m on player purchases in 2019/20, including Ismaela Sarr, Ignacio Pussetto (from the Pozzo family’s Udinese), Craig Dawson and Joao Pedro. This was in the bottom half of the Premier League, around the same level as Sheffield United. had £303m gross spend in the transfer market in their 5 years in the Premier League (net spend £195m), significantly higher than the £8m they spent in the preceding 5-year period.

The wage bill rose £12m (15%) from £84m to £96m, a club record, with playing staff increasing from 65 to 74. This means that wages have grown by two-thirds since first season in the Premier League (£58m). Despite this growth, the £96m wage bill was the 4th lowest in the Premier League. It will fall in the Championship season, due to player departures and relegation clauses (though media reports suggest that some players did not have these).

As a result of the revenue fall, the wages to turnover ratio increased (worsened) from 57% to 80%, the 8th highest in the Premier League. In fairness, without the COVID revenue loss the Swiss Ramble estimates that this ratio would have been only 66%.

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 s

Gold standard ground boosts Tottenham's income

The gold standard in European football grounds is the Tottenham Hotspur stadium in north London, a £1bn construction project completed in 2019. Its impact on the club’s finances has become increasingly clear as the effects of the pandemic have faded. Previously, the average fan would spend less than £2 inside the ground on a typical match day, but now that figure is about £16, thanks to new facilities including the longest bar in Europe and an on-site microbrewery. Capacity has gone up from 36,000 at the club’s previous home of White Hart Lane to 62,000. The new stadium — built on land adjacent to White Hart Lane — has opened the door to a broad range of other events that have helped to push commercial income up from €117mn in 2018 to €215mn in 2022. Last year, Tottenham hosted US singer Beyoncé for five nights on her global Renaissance tour, two NFL matches, as well as rugby games and heavyweight boxing bouts. Money brought in from football has gone up too. Match day income is

Spurs to sell minority stake

Tottenham Hotspur is in talks to sell a minority stake in a deal that could value it at up to £3.75 billion and pave the way for Joe Lewis and his family to sever ties with the Premier League football club. Tottenham chairman Daniel Levy is seeking an investment that values the club at between £3.5 billion and £3.75 billion, including debt. While the terms of any deal have not been finalised, City sources expect Spurs to sell about 10 per cent. The club is being advised by bankers from Rothschild on the sale. Tottenham wants to raise fresh capital for new player signings and to help fund the development of an academy for its women’s team, as well as a 30-storey hotel next to its north London stadium. The financier Amanda Staveley, who brokered the deal for Saudi Arabia’s Public Investment Fund to take over Newcastle United, is understood to be among the parties to have expressed an interest in Tottenham. Staveley’s fund, PCP Capital Partners, has raised about £500 million to depl

The Political Economy of Football V2

Search This Blog