The authoritative Swiss Ramble reviews the latest accounts of West Bromwich Albion. The club swung from £23m pre-tax loss to a small £0.1m profit, as revenue almost doubled from £54m to £107m following promotion to the Premier League, though profit on player sales fell £25m to £4m and operating expenses rose £4m (4%) in the top flight. WBA were one of only five Premier League clubs to report a pre-tax profit in 2020/21.
Before last season’s small surplus the Baggies had posted
three consecutive losses, amounting to £37m. However, traditionally West Brom
have been quite prudent financially, making money every season from 2010 to
2017. Indeed, they had the seventh highest profits in PL in last 10 years.
Revenue
Main driver of the£53m revenue increase was broadcasting, up
£56m from £41m to £97m, due to the more lucrative Premier League TV deal,
though commercial also grew £2m (21%) to £10m. This offset the COVID driven
reduction in gate receipts, down £4.8m (98%) to just £74k.
Commercial income rose £1.8m (21%) to £10.1m, thanks to
higher sponsorship. However, a fair bit lower than £15.3m peak in 2018, due to
COVID and only 11 months. This was the
smallest in the top flight, just below Burnley. For more context, it was over a quarter of billion less than Manchester
City £272m.
Despite the growth following promotion, revenue was still
£31m (22%) lower than the Premier League high of £138m in 2017, largely due to
less central TV distributions, though there were also falls in gate receipts
£7m and commercial £2m (mainly because of COVID). In fact, the £107m revenue was comfortably
the lowest in the Premier League, a fair way below Burnley and Sheffield United
£115m and less than a fifth of Man City £570m.
Player transfers
Profit from player sales fell £25m from £29m to £4m, mainly
Oliver Burke to Sheffield United and Jonathan Leko to Birmingham City. One of
the smallest player trading results in the Premier League. Like many other clubs, the Baggies have
become increasingly reliant on player sales with £63m profit in the last 5
years compared to only £27m in the preceding 5-year period, though still on low
side for PL. Sold players for £19m after these accounts, mainly Matheus Pereira
to Al Hilal.
Although the club maintained gross transfer spend in their
two years in the Championship, high player disposals meant that they had net
sales in this period. Following promotion to the Premier League, they returned
to £35m net spend. However, the club have spent very little since
relegation, as many players have arrived on free transfers or loans. In fact,
of the teams playing in the 2020/21 Premier League, West Brom had the third
lowest gross spend in the last five years, only above Burnley and Sheffield
United
As West Brom were relegated after just one season in the
Premier League, they only get two years of parachutes (instead of the full
three years). Details not published for 2020/21, but in 2019/20 a relegated
club received £42m in year one and £34m in year two.
Average attendance of 24,053 in 2019/20 (for games played
with fans) would have placed them firmly in the bottom half of the Premier
League, though crowds held up pretty well after relegation to the Championship.
Wages
Wages up £10m (15%) from £67m to £77m, though growth
restricted as prior year included large promotion bonus. It’s also a bit
misleading, as accounting period changing from 13 months to 11 months. On a
like-for-like basis, the increase would be £22m (36%) from £62m to £84m. £67m wage bill was the second smallest in the
Premier League, only ahead of Sheffield United £57m. While the club could be
commended for its tight cost control, the flip side is that low wages made
relegation more likely (though survival would have triggered a bonus payment).
The wages to turnover ratio fell from 124% in the
Championship to 72% in the Premier League. This was mid-table, though I
calculate it would have been 78% if adjusted for the 11 months’ accounts, which
would have been one of the highest in the top flight.
Debt
Gross debt in the football club decreased from £24m to £19m,
all owed to the owners (unsecured, no fixed repayment date) with no external
debt. The club’s holding company, West Bromwich Albion Holdings Limited, has
zero financial debt. £19m gross debt
was one the lowest in the Premier League.
Loans provided by the owners are interest-free, which gives them a
slight competitive advantage against many other clubs who have to pay interest
on their loans.
In the last 9 years the Baggies have been largely
self-sustaining, generating an impressive £137m from operations, supplemented
by £17m of owner loans. Of this, £101m was spent on players (net), £27m on an
inter-company dividend in 2016, £12m tax and £10m capex. Only £17m owner funding has been provided in
the last 10 years, which was one of the lowest in the Premier League. In fact, the
club actually loaned £5m (£4.95m plus £50k interest) to Wisdom Smart
Corporation Ltd, a related party to controlling shareholder Guochuan Lai, as
the COVID pandemic saw his “international business suffer”, which is hardly
comforting to Baggies’ fans.
The club said they “maintained a solid financial position”,
which is true, though the loans to the owner do leave a bad taste in the mouth.
Lai is “confident” that the club will be able to compete for promotion from the
Championship this coming season, but fans may not be so sure.
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