‘West Ham have spent big but the money has been wasted’

The Irons have lived beyond their means but have little to show for the investment

West Ham’s financial accounts for the 2018/2019 season were released in late January and show a record turnover of £190.7m but a big loss of £28.2m when player trading was factored in.

The main areas show that turnover increased by £15.4m (8.8 per cent) from £175.3m to £190.7m, and TV income grew by £8.9m (7.5 per cent) from to £118.5m to £127.4m.

Ticket income also grew by £2.9m (11.8 per cent) from £24.5m to £27.4m while commercial and sponsorship including corporate hospitality sales grew by £3.4m (14.1 per cent) from £24m to £27.4m.

Other areas saw retail and shop sales grow by £500,000 (6 per cent) from £8.2m to £8.7m, and wages increase by £29.2m (27.4 per cent) from £106.6m to £135.8m which means wages account for 71.2 per cent of turnover.

The club published a gross profit of £20.6m but this reduced to a net loss of £28.2m after net spend of player trading was factored in.

The highest-paid director wages (believed to be West Ham Vice-Chairman Karren Brady) increased her salary from £898,000 to £1.13m.

Lastly, net spend on player transfers was listed at £89.4m for last season 2018/2019 with £6.8m of potential add-ons.  Post balance notes reveal a net spend on transfers of £35.8m last summer (2019) with £3.4m of potential add-ons.

In the last four years the club say they have spent £214.4m net on new players and has invested £22m on infrastructure, including complete refurbishment of facilities at Rush Green, including a new gym and new training pitches; the Academy at Chadwell Heath was totally rebuilt; and almost £2m has been invested in the Women’s team.

Moving on to West Ham loans, and the club re-paid a £39m short-term loan to Media Rights and Funding between May and July 2019.

A new short term loan of £39m with Media Rights and Funding was secured against the training grounds and Stadium lease to help with cash flow.

The Share Holder loan balance of £45m has been deferred from payback in January 2020 to a date yet to be defined.

Two payments of £2.9m were paid to David Sullivan and David Gold in respect of interest accrued on Share Holder loans.  Interest was charged at 4.25 per cent. 

An additional £1m payment was made to a company controlled by David Gold as a partial payment of loan capital bringing the total paid back to £3.9m down from £4.6m the previous year.

West Ham’s (cash) interest payment of £6.8m was the fourth largest in the Premier League, split £4.6m to Sullivan and Gold ( £1.9m annual charge plus accrued interest) and £2.2m bank loan.

The owners are not paid a salary or dividend, but they have received a lot of interest. In fact, including the £1.9m paid in August after these accounts closed, Sullivan and Gold have now taken a total £18.7m interest on their loans over the last ten years

As for our debt, West Ham’s net debt increased by 90 per cent from £35m to £66m, as gross debt rose £13m to £78m, while cash fell £18m to £13m.

Shareholder debt unchanged at £54.5m ( £45m from Sullivan and Gold at 4.25 per cent interest and £9.5m interest-free from J Albert Smith), but bank loan was up £13m to £23m.

After many years of falling debt at West Ham, the 2019 increase was ‘due to the sizeable investment in the playing squad and first-team management’.

West Ham’s debt of £78m is nowhere near the largest in the Premier League, but they also owe £87m in outstanding transfer fees (up from £57m the previous year).

For some perspective, Man United and Spurs have around £500m debt, followed by Everton £337m, Brighton £280m and Aston Villa £217m.

But how do we compare to other clubs?

West Ham are ranked seventh for match day income with £27.1m of ticket revenue but some way behind the top six.

Manchester City (sixth) £55m, Chelsea (fifth) £66.6m, Arsenal (fourth) £69.3m, Spurs (third) £71m, Liverpool (second) £81m, Manchester United (first) £110.8m. Newcastle are ranked eighth behind the Hammers on £23.9m.

West Ham rank 11th in annual match day income per supporter with £465, Chelsea rank first with £1,468 per supporter.

West Ham rank eighth in commercial income with £36.1m behind Everton seventh on £40.8m and the usual top six.

West Ham also rank eighth in broadcast income with £127.4m behind Everton seventh with £132.7m.

The Hammers rank seventh in overall income with £191m just ahead of Everton’s £188m and Newcastle’s £179m.

West Ham rank eighth in the wage bill with £135.8m behind Spurs’ £147.6m and Everton’s £160m.

Squad amortisation for 2018/19 was a record £57 million, up 40 per cent on the previous season, again suggesting investment was made, but the decisions made by the recruitment team were unsuccessful.

Relegation would be financial Armageddon for the club with the turnover falling by over 50 per cent and although the squad have 50 per cent wage cut relegation clauses in their contracts there would be a very large financial hole the owners would have to fill if the worst happened. BBM

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