Did Watford spend enough last season?

Watford’s pre-tax loss slightly reduced from £19m to £16m in 2021/22. Revenue shot up £71m from £57m to £128m following promotion to the Premier League, but profit on player sales fell £41m from £56m to £15m, operating expenses rose £23m (18%) and net interest payable increased £2m (34%) to £7m.

Watford have now posted losses in four out of the last five seasons, even though they spent all but one of them in the Premier League. Their total loss over this period amounted to £92m, but there is a crumb of comfort in the fact that losses have now reduced two years in a row.

The main driver of Watford’s £71m revenue growth was broadcasting, up £35m (71%) from £50m to £85m, due to the more lucrative Premier League deal, though commercial also grew an incredible £32m from £4m to a club record £36m.  \yhere is some doubt over whether this also includes an element from the Premier League TV deal.

Although losing money is rarely good news, Watford’s £16m loss was actually one of the better financial performances in the 2021/22 Premier League. Many clubs reported much higher losses last season, including Manchester United £150m, Chelsea £121m, Leicester City £92m, Newcastle United £73m and Tottenham £61m.

Watford made £15m profit from player sales, mainly from Cucho Hernandez to Columbus Crew and Will Hughes to Crystal Palace.  This was significantly lower than the previous season’s £56m profit, when they made many sales, partly in an attempt to balance the books in the Championship, partly because players wanted to leave after relegation.

Watford’s business model has become more reliant on player sales, as they have make £111m profit from this activity in the last four years, which was more than twice as much as their £55m profit in the preceding 9-year period.   In fact, Watford had the sixth highest profits from player sales in the Premier League in the last four years (for clubs competing in the top flight in 2021/22). They were only behind Chelsea, Manchester City, Leicester City, Everton and Liverpool.

Watford’s bottom line has often been hit by the cost of termination payments for sacked managers. In 2021/22 this increased from £2.2m to £7.8m, following the departures of Xisco, Ranieri and Hodgson.  The previous season featured payouts to Nigel Pearson and Vladimir Ivic, while 2019/20 included £6.7m for Javi Gracia and Quique Sanchez Flores. This season will presumably include yet more pay-offs to Edwards and Bilic.

Wages were much smaller than the last time the club were in the Premier League in 2019/20, when they paid £96m. This was also Watford’s lowest in the top flight since 2016/17.   For some context, Watford’s wages were only around a fifth of Manchester United’s £384m.

Watford’s 62% wages to turnover ratio was one of the better wages to turnover ratios in the Premier League for clubs outside the Big Six (who benefit from much higher revenue). That said, Hornets fans might have preferred to see more of the club’s money on the pitch, which might have avoided the immediate relegation.

Watford only spent £24m on player purchases, the lowest in the Premier League in 2021/22, miles below the likes of Aston Villa £204m, Arsenal £188m and Tottenham £160m.  Watford’s £24m player purchases in 2021/22 was actually one of the lowest in the first season in the Premier League for promoted clubs, much less than the likes of Nottingham Forest and Aston Villa (both above £150m).  The club would no doubt argue that this was not required after only one season out of the top flight, but this clearly harmed their chances of survival.   Interestingly, Watford’s £24m gross spend in the Premier League was only £3m more than their £21m outlay in the Championship the previous season

Watford’s £125m gross debt was the 8th largest in the Premier League, only just below Liverpool £159m. This is a relatively large amount of debt for a club of Watford’s size, around 100% of their turnover (in the top flight).

The £65m owner funding in the last five years is not that high for the Premier League. In that period, owners at five clubs have put in more than £200m, led by Everton £574m, Chelsea £416m and Aston Villa £351m.

Scott Duxbury said that promotion into the Premier League was the club’s goal, but this is now out of reach. From an outsider’s perspective, the constant changing of manager seems counter-productive.  The fans’ patience with the owner has been severely tested in the last couple of years. It is debatable whether this seemingly broken relationship can be mended.