Watford have had 13 coaches in five seasons, unless I’ve lost count, which doesn’t exactly inspire confidence in the club’s executive leadership.
Watford swung from a pre-tax £16m loss to a £24m profit in
2022/23, despite revenue dropping by £62m (48%) from £128m to £66m following
relegation to the Championship.
Operationally, this was largely offset by the club cutting
expenses by £58m (38%) from £152m to £94m, but another big reason for the
improvement in the bottom line was a significant increase in profit on player
sales from £15m to £59m.
Excluding player trading, Watford still made a substantial
£28m operating loss, which was actually £4m worse than the previous season.
The main driver of Watford’s £62m revenue decrease was
broadcasting, which nearly halved in the Championship, falling £37m from £85m
to £48m. Commercial income was also slashed by £26m (71%) from £36m to £10m. However, match day was flat at £6.8m, while
player loans actually increased from £0.5m to £0.8m.
Watford’s £24m pre-tax profit is by far the best result of
those Championship clubs that have published 2022/23 accounts to date. All the
other eight clubs have posted losses, ranging from Hull City’s £5m to Norwich
City’s £27m. It may be the highest ever in England’s second tier.
Reliance on player
sales
Clearly, Watford’s figures hugely benefited from £59m profit
from player sales, up from the previous year’s £15m. In the summer of 2022,
they sold Hassane Kamara and Adam Masina to Udinese, Emmanuel Dennis to Nottingham
Forest, Samir to Tigres and Moussa Sissoko to Nantes. Even though Joao Pedro was sold to Brighton
for a reported £30m after last season finished, the deal was completed before
the 30th June year-end, so is included in the 2022/23 accounts.
Watford’s business model has become more reliant on player
sales, making an incredible £171m profit in the last five years, significantly
higher than the £40m profit in the preceding 5-year period.
In fact, Watford have the two of the four highest profits
from player sales in Championship history, both made in the last three seasons.
Last season’s £59m has only been surpassed (just) by Norwich City’s £60m in
2020/21.
This is the first time that Watford have generated a net
profit since 2019, having lost a total of £71m in the preceding three years.
The club’s bottom line has now improved three years in a row since the £36m
loss in 2019/20. Over the course of the
last decade, they have accumulated £65m of losses, though they did manage to
make money on four separate occasions, which is not too shabby in the crazy
world of football finance.
Watford’s owners, the Pozzo family, are well-known for their
multi-club ownership model, as they also own Udinese in Serie A and owned
Spanish club Granada in the past.
Watford’s £66m revenue is £82m (55%) lower than their £148m
peak in 2019, when they finished 11th in the Premier League. All revenue
streams have fallen since then, though the largest decrease is broadcasting,
which is down £71m (59%).
Even after the steep decrease following relegation,
Watford’s £66m revenue was still the second highest in the Championship last
season, only behind Norwich City £76m, though that position might be threatened
by the other relegated club, Burnley, when the Clarets release their 2022/23
accounts.
The main reason that Watford’s revenue was so high was £44m
of parachute payments last season, slightly more than the £42m they received
the previous time they were relegated two years before.
Watford’s average attendance of 19,172 was understandably
lower than the club’s crowds in the Premier League, in fact around 1,700 less
than the 20,836 peak in 2019/20. On the other hand, it was around 2,500 (15%)
higher than the last time they played in the Championship (with fans in
attendance). The club is reviewing
options to develop the stadium in order to increase capacity in both
hospitality and general seating areas.
Wages
Watford’s wages were cut by £30m (38%) from £79m to £49m,
thanks to player departures and relegation clauses. Termination payments to
former coaches decreased from £7.8m to £2.0m, so underlying wages were “only”
down £24m (34%) from £71m to £47m.
This is the club’s lowest wage bill for eight years, having
virtually halved from the £96m peak in the Premier League. Watford’s wages were
also much higher the last time they were in the Championship two years ago, as
hefty promotion bonuses took them to £65m.
Despite the steep reduction, Watford’s £49m wage bill was
still pretty high for the Championship, only surpassed by Norwich City’s £56m
last season. Nottingham Forest’s £59m in 2021/22 was inflated by a sizeable
promotion bonus.
There has been a distinct change in Watford’s activity in
the transfer market in the last three years (two of which were spent in the
Championship), when they had a total of £56m gross spend, i.e. less than the
£66m they splashed out in 2019/20 alone. Similarly, the club averaged £72m in
the three years between 2016 and 2018. Watford
have only had net spend once in the last five years, averaging £19m net sales
in this period, including £65m last season.
There have been a few media reports that the Pozzo family
have been in discussions about selling a stake in Watford with at least two
investment groups involved, though it’s gone a little quiet on that front
recently. Owner Gino Pozzo is also
facing a potential trial on tax fraud charges in Spain, linked to transfer
deals involving his previous ownership of Granada, though the Italian has
denied these claims.
If Watford do not go up, they will be face with the loss of
parachute payments next season, which will mean having to operate on a smaller
budget. In the latest accounts, Scott
Duxbury concluded, “'Promotion into the Premier League for the 2024/25 season
is the goal we now set ourselves and the shareholders are committed to invest
in the club to support the goal and realise this ambition.” That’s a laudable objective, but it looks
like the odds are against Watford bouncing back to the top flight any time soon.
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