Watford’s 2023/24 financial results covered their second season in the Championship following relegation from the Premier League. Boosted by parachute payments, relegated clubs often bounce back quite quickly, though the Hornets have struggled.
Despite going through managers like a hot knife through
butter, Watford have actually done pretty well on the pitch, at least until the
recent blip, as they have played in the Premier League in six out of the last
nine seasons.
Watford’s pre-tax profit almost halved from £24.1m to
£12.8m, mainly due to a significant reduction in profit on player sales from
£59m to £29m, though revenue also fell £8.6m (13%) from £66.2 to £57.6m.
This was partially compensated by a £25m (27%) decrease in
operating expenses from £94m to £69m, as the club “implemented several cost
saving initiatives and made efficiencies across the business”. As a result, Watford posted a large profit
for the second year in a row, though this was again driven by player trading,
as their operating loss was £11m..
Broadcasting fell £3.3m (7%) from £48.3m to £45.0m, as the
parachute payment was lower in the second year after relegation from the
Premier League. However, the largest
year-on-year decrease was actually in commercial, which dropped by more than a
third (£4.1m) from £10.3m to £6.2m, while match day was down £0.5m (7%) from
£6.8m to £6.3m.
Watford’s £12.8m pre-tax profit is by far the best result of
those Championship clubs that have published 2023/24 accounts to date. All of
the other seven clubs have posted losses, ranging from Plymouth Argyle’s £2.4m
to Hull City’s £18.8m.
In fact, Watford were also the only club that managed to
generate a profit the previous season. To
underline how good this financial performance was, no fewer than six clubs lost
more than £20m in 2022/23, namely Burnley £36m, Sheffield United £31m,
Birmingham City £25m, Bristol City £22m, Blackburn Rovers £21m and QPR £20m.
In the last two years Watford have registered two of the
highest profits ever in the Championship. In fact, their £24.1m profit in
2022/23 has only been surpassed by Norwich City £30.7m in 2017/18 and Brentford
£24.3m in 2018/19.
They have managed to make money on five occasions in the
last decade, which is not too shabby in the crazy world of football finance,
though their overall deficit in this period was still as high as £52m, thanks
to a couple of substantial losses.
Importance of player
sales
Clearly, Watford’s figures have benefited in a big way from
profit from player sales, even though this halved from £59.2m to £29.3m last
season.
Watford’s business model has become more reliant on player
sales, making an incredible £200m profit in the last six years, significantly
higher than the £42m profit in the preceding 6-year period.
High player sales are particularly noticeable in the season
after relegation, when Watford tend to make a lot of money, partly in an
attempt to balance the books in the Championship, partly because some players
want to leave to remain in the higher league.
Watford’s accounts have often been hit by termination
payments for sacked managers, including £1.1m last season when Ismael exited
stage left. Although this is down from the £7.8m peak in 2021/22, the club has
still paid out nearly £20m in the last five seasons.
Watford’s owners, the Pozzo family, are well-known for their
multi-club ownership model, as they also own Udinese in Serie A (and used to
own Spanish club Granada).
As a result, there have been numerous transfers between the
clubs in the last few years. Sales from Watford to Udinese have included
Kamara, Deulofeu, Masina, Success, Kabasele and Okoye: while many players have
moved in the opposite direction, including Pussetto, Penaranda, Vydra, Ighalo,
Samir, Nyom, Forestieri and Caetano.
Watford’s £58m revenue is £90m (61%) lower than their £148m
peak in 2018/19, which was when they finished a creditable 11th in the Premier
League. All revenue streams have fallen since then, though the largest decrease
is broadcasting, which is down £74m (62%).
Following relegation, Watford reduced season ticket prices
by 7% in 2022/23 and have frozen prices for the two seasons since then, which
is to their credit, given the increases applied at many other clubs.
Wages cut
Watford’s wages were cut by £15.7m (32%) from £48.7m to
£33.0m, the club’s lowest since 2014/15. There has been significant cost
cutting since relegation, due to player departures and relegation clauses, so
the wage bill has fallen by nearly 60% (£46m) in the last two years.
As a result, wages are only around a third of the £96m peak
in the Premier League in 2019/20, though that outlay was not enough to prevent
relegation. Watford’s wages have also been much higher in the Championship, as
hefty promotion bonuses took them to £65m in 2020/21.
Watford’s 57% is currently the lowest wages to turnover
ratio in the Championship by far, a lot less than Plymouth Argyle’s 66%. On the
one hand, this is good news for the bottom line; on the other hand, it does
highlight that the club could have invested more in the squad.
Despite Duxbury saying that the club “continues to enhance
its value by strengthening the squad”, there was minimal investment again this
summer with Watford’s £2.8m being one of the smallest in the Championship,
miles below Burnley £43m, Leeds United £27m and Hull City £25m (according to Transfermarkt).
Debt
Watford’ gross debt was significantly reduced by £42m from
£115m to £73m, mainly because repayments cut their external loans (mainly from
Macquarie Bank) by £44m from £64m to £20m.
The club has to repay £14.7m of this debt to Macquarie by end-June 2025,
though this should be achievable in line with stage payments from previous
player sales.
As a result of the high amount of external debt, Watford
have paid quite a lot of interest, adding up to £42m in the last eight years,
though it did decrease from £5.6m to £3.5m last season and is significantly
down from the £9.2m peak four years ago. The Macquarie loans carry interest
between 5.35% and 11% per annum.
Watford’s cash balance decreased from £7.6m to just £3k,
while the club also had to take out a £620k overdraft. This suggests that cash
was extremely tight at year-end. The
lack of liquidity is a bit concerning, so Watford will have to box clever in
the next few months. At the very least, it makes it unlikely that the club will
spend much this transfer window.
There have been some media reports that the Pozzo family
would be open to selling the club, so the owners would probably not wish to put
more money into the club at this stage. However, it’s a tricky balancing act,
as they would surely want to ensure that Watford remain an attractive
proposition to potential investors.
It’s extremely rare for a club in the Championship to make
money, so Watford should be commended for posting large profits two years in a
row. In this period, they have shown that they are able to cut costs, while
also significantly reducing debt.
However, it’s not all good news, as the profits were only
made on the back of substantial player sales, which cannot be guaranteed every
year – and also weakens the squad.
Moreover, they have lost a huge chunk of their revenue this
season after the parachute payments ended, which means that they now have to
compete with an even smaller budget. That
said, Watford have been “in and around” the play-off places for most of this
season, so going up is definitely not out of the question.
Comments
Post a Comment