From his Zurich base the tireless Swiss Ramble analyses
another set of club accounts, this time Watford.
Despite impact of relegation and COVID, the pre-tax loss
reduced from £36m to £22m, even though revenue fell £63m (52%) from £120m to
£57m, as profit on player sales shot up from £18m to £56m and expenses were cut
£35m (21%). Other income included £2.5m insurance claim.
Poor record on losses
Even though the
Hornets narrowed their loss to £22m, it was still one of the worst in the
Championship, only “beaten” in 2021 by Bristol City £38m, Reading £36m and Boro
£31m. Also worth noting that the other clubs relegated from PL in 2020 posted
profits: Norwich £21m and Bornemouth £17m.
Watford have now reported losses in three out of the last
four seasons, even though they spent all but the last one in the Premier
League. Their total loss over this period amounted to £79m. Overall, they had
broken-even in the preceding 6-year period.
The operating loss (i.e. excluding player sales and
interest) increased from £47m to £72m, down from just £6m two years ago. Very
few clubs manage to make operating profits, but this is not only Watford’s
worst ever performance, but is the highest in the 2021 Championship.
Figures should be better this season after promotion to the
Premier League, as was the case with Leeds and Norwich, but this is not
guaranteed, as revenue increase is sometimes wiped out by higher expenses
One reason for the 2021 lower loss was a reduction in
termination payments for sacked managers, as they only paid out £2.2m to Nigel
Pearson and Vladimir Ivic, compared to £6.7m for Javi Gracia and Quique Sanchez
Flores. This season will include pay-off to Claudio Ranieri.
Falling revenues
Main driver of the
revenue decrease was broadcasting, down £45m (48%) from £95m to £50m, as TV
deal is much more lucrative in the Premier League, though also big falls in
commercial, down £13m (
Commercial revenue dropped a considerable £13.2m (76%) from
£17.4m to £4.2m, as relegation and the pandemic took their toll. This was in
the bottom half of the Championship, only around a third of Stoke City’s £12m.
Revenue was 3rd highest in the Championship, only below the
other clubs relegated with them in 2019/20: Cherries £72m and Canaries. Parachute payments are so significant that
they make it difficult for other clubs to compete. Unfortunately, the Premier
League has not published details of 2020/21 payments, but in 2019/20 a
relegated club received £42m in year one, £34m in year two and £15m in year
three.7m. Clubs with parachute payments from the Premier League have a clear
financial advantage.
If Watford end up being relegated this season after just one
campaign in the top flight, they would only get two years of parachutes
(instead of the usual three years). Clearly, they would still hold an advantage
over most others, but the pressure would be on.
The £57m revenue
is £91m (61%) lower than their £148m peak in 2019, i.e. pre-pandemic in the
Premier League. Even with the benefit of parachute payments, broadcasting has
dropped £69m, while commercial and match day are down £14m and £8m
respectively.
Player sales and transfers
They significantly benefited from £56m profit on player
sales, up from £18m in 2020, have
become more reliant on player sales, making £121m profit in last 5 years,
compared to only £23m in preceding 5-year period. This season is much lower
with only £9m after year-end, mainly Hughes to Palace, though the likes of Sarr
& Dennis would generate good money.
They spent £21m on player purchases, including Imran Louza
from Nantes and Emmanuel Dennis from Club Brugge. Although this was a large
reduction from prior year’s £66m in the Premier League, this was actually 3rd
highest in the Championship, just behind Brentford and Norwich. The Hornets have had £324m gross spend in the
transfer market in the last six years (net spend £145m), though most of that
(£216m) came in the three years between 2016 and 2018. However, per the
accounts, the outlay since year-end is only £11m.
They have spent a lot on agent fees. An FA report for the 12
months to January 2022 revealed their £13m expenditure was the highest in the
Premier League outside the Big Six, mainly on Arnaud “Mogi” Bayat, named by
Belgian authorities as a suspect in a fraud investigation.
Average
attendance in 2019/20 in the Premier League (for games played with fans) was
20,836, which was around 4,000 (25%) higher than the last time they were in the
Championship in 2014/15. The club is reviewing options to develop the stadium
to increase capacity.
Wages
The wage bill
decreased £28m (29%) from £96m to £68m, despite including hefty promotion
bonuses, the club’s lowest since 2016. Termination payments to former coaches
fell from £6.7m to £2.2m, so underlying wages dropped £24m (26%) from £90m to
£66m.
The £68m wage bill was the highest in the Championship in
2020/21, ahead of Norwich £67m, Bournemouth £57m and Stoke City £50m. In fact,
this was the 7th highest ever in this division, though a fair way below Villa
£83m in 2018/19.
As a result of the revenue decrease, Watford wages to
turnover ratio increased (worsened) from 80% to 119%, though this was not too
bad in the Championship, where most clubs have ratios above 100% (with no fewer
than 5 above 200% in 2020/21).
Total directors remuneration fell slightly from £953k to
£934k, but this was still 3rd highest in the Championship. Payment to the
highest paid director, presumably chairman and CEO Scott Duxbury, was basically
unchanged at £931k, i.e. no relegation clause here.
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