Slowly but surely, West Ham are getting out of the woods

Blowing Bubbles cuts through the jargon of the club’s latest accounts

West Ham United’s turnover grew to a record £115m last season up from £89.8m the previous season. They also recorded a record profit of £10.3m compared to a loss of £3.5m the previous year. Financial accounts submitted to companies house and published on WHUFC.com just before the New Year make interesting some reading as to the state of West Ham’s financial health.

You have remember that these figures are nine months out of date when published and relate to last season with all activities up to May 31, 2014. Match day ticket sales grew to £19.5m, an increase of £1.5m on the previous year, TV broadcast income grew massively from £51.8m to £75.4m due to the new Sky/BT deal, Commercial activities such as sponsorship deals slightly dropped by £300,000 to £13.6m while retail sales in the club stores slightly increased by £200,000 to £6.3m.

The accounts for the year ending 31st May 2014 filed at companies house show they spent £32.9m in transfer fees for the 2013/14 season including Andy Carroll and Stewart Downing and have spent a further £23m in 2014/15 for players including Enner Valencia, Morgan Amalfitano, Diafra Sakho, Cheik Kouyate and Aaron Cresswell to date.

There are a further £4.7m of new liabilities potentially due based on certain success conditions of some players. These will usually be based on appearances, goals and sometimes league position written into some transfer deals. This brings the total player transfer deal liabilities to just over £7m in fees we may have to pay other clubs depending on certain success circumstances.

Sullivan and Gold invested another £3.5m of their own money last season on top of the £10.5m they invested the year before. Gold and Sullivan are now owed a total of £49.2m in share holder loans together with another £6.6m of accrued rolling interest. The interest on these share holder loans is charged between 6% and 7% but is deferred until the loans are repaid.

West Ham repaid £5.5m of their bank loan to 10% shareholder CB Holdings in August 2013 and a further payment of £5.5m on 1st September 2014, this is part of strategy to be free of bank debt by the time we leave the Boleyn Ground based on the fundamental that these loans are mortgaged against the Boleyn Ground and other land owned by West Ham. Bank loans totalled £41.7m on 31st May 2014 down from £44.6m the year before.

The bank loans were refinanced in 2013 and now due by the 31st December 2016. However, it should be remembered that the banks are in fact the Icelandic CB Holdings Ehf and David Sullivan who are both shareholders so maybe shouldn’t be considered as true third party debt. On 31st May 2014 we still owed debts of £24.4m to other clubs relating to player transfers. This are probably relating to staged payments.

Wages and salaries grew to £63.8m from £56.2m the season before. These figures include non playing staff, Directors were paid a total of £829,000 down from £1.96m the previous year with the highest paid director believed to be Karren Brady receiving £636,000 down from the £1.63m the season before. The reduction is believed to be related to the £1m bonus Baroness Brady received for winning the Olympic Stadium bid although it is paid over five years.

Wage/Turnover is down to a record low of 55.6 per cent which is down from 62.6 per cent the previous year and 90.2 per cent of our year in the championship. This is a good indicator of financial sustainability in football. The accounts confirm West Ham borrowed £18m from Vibrac Corporation as a pay day loan in 2014 after previously borrowing £15m in 2013 and £12.8m in 2012.

These loans are automatically paid back by the Premier League to Vibrac Corporation from broadcast income. It is believed they attract interest of 10% and act like a bank overdraft to ease cash flow pressures on the club. So what does this all mean? The financial heath of the football club continues to improve mainly thanks to the continued personal support of the chairman.

I believe the next two seasons will show a similar set of results maybe pushing turnover up between £5m and £10m due to better ticket sales, better league position and better commercial and retail activities. I expect them to publish results between £120m-£125m turnover with a healthy profit this time next year and the year after.

The next financial step change will come from moving to the Olympic Stadium in the 2016/2017 season. I personally estimate ticket sales including corporate revenue could double from £20m to £40m, commercial activities with commercial activities rising £20m and retail growing to around £10m. Those targets would turn us into a £150m turnover football club which should help us on the playing side too.

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