Accounts lay bare the impact of COVID-19 on West Ham and others

We take an in-depth look at our current financial situation and compare our books to others

West Ham co-owners David Sullivan (top) and David Gold (face shield) at the EPL match West Ham United v Burnley, at the London Stadium, London, UK on 16th January, 2021. English Premier League matches are still being played behind closed doors because of the current COVID-19 Coronavirus pandemic, and government social distancing/lockdown restrictions.

West Ham’s 2019/20 financial results covered an ‘unprecedented’ season when we finished 16th in the Premier League with our finances significantly impacted by COVID-19 and David Moyes replacing Manuel Pellegrini as manager in December 2019. 

Our latest accounts show our loss before tax loss widened from £28m to £65m, as revenue dropped £51m (27%) from £191m to £140m, offset by profit on player sales rising £12m to £25m and expenses falling £2m..

Impacted by COVID-19, the main driver of our revenue decrease was broadcasting income, which dropped £45m (35%) from £127m to £82m, though there were also falls in matchday, down £5m (17%) to £23m, and commercial, down £2m (5%) to £34m.

Our wage bill fell £8m (6%) to £127m, while other expenses were cut £1m (4%) to £33m. 

But player amortisation increased £3m (4%) to £60m and net interest payable rose £1m to £5m, while there were £3.5m exceptional charges for Manuel Pellegrini’s sacking.

As the club stated: ‘The financial effect of COVID-19 has been significant for all Premier League clubs and we are no exception’. 

In fact, four clubs have already posted larger losses than our £65m, namely Everton £140m, Southampton £76m, the North London Lilywhites £68m and Brighton £67m, while the North London Gunners were £54m.

Excluding COVID-19, our revenue would have been £42m higher, as £26m broadcasting deferred to 2020/21 and £16m lost (match day £10m, TV £6m). 

Offset by £2m cost savings, giving a net £40m impact. However, perhaps worryingly, we would still have made a £25m loss, similar to the prior season.

This loss would have been even higher without £25m profit on player sales (including £2m player loans), significantly up from the £13m the previous year, mainly Arnautovic to Shanghai SIPG, Hernandez to Sevilla, Fernandes to Mainz, Obiang to Sassuolo and Perez to Alaves.

We have posted losses two years in a row, amounting to a combined £94m deficit, though we made profits in four of the previous five years – but 2019/20 is the highest loss since £37m in 2008.

Like many clubs, the accounts show we have become increasingly reliant on player sales, averaging £24m a season over the last four years. The next set of accounts will benefit from the sale of Grady Diangana to WBA, though the transfer of Sebastian Haller to Ajax was at a loss.

The adverse impact of many exceptional items that have historically hit our accounts is largely a thing of the past, though 2019/20 included a £3.5m pay-off for Pellegrini. 

But looking at our EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), which strips out player sales and exceptional items, fell from £23m profit to £19m loss. 

This is actually the worst in the Premier League, though may be beaten when other clubs publish 2019/20 accounts.

Looking at operating loss (excluding player sales and interest) now and ours more than doubled from £37m to £85m, though other clubs had even higher losses: Everton £175m, the West London Blues £112m, the North London Gunners £99m and Southampton £87m. 

The only Premier League club to make an operating profit in 2019/20 was Norwich City with just £3m.

The club has said: ‘We’ve seen strong turnover growth over the last five years’, but this is only £19m (16%), much lower than the Big Six. 

In fairness, the next set of accounts will look better, due to deferred TV revenue (plus more money for better league position), offset by loss of match day.

Our £140m revenue is down to 12th highest in the Premier League, though this is partly because our accounts close relatively early on 31st May, so more revenue has been deferred to the 2020/21 accounts than others whose accounts close on 30th June or 31st July, e.g. Crystal Palace.

All Premier League clubs’ revenue is down in 2019/20, due to the impact of the pandemic, though our 27% reduction is the highest in the Premier League (larger clubs are more in absolute terms). Everton’s small 1% decrease is due to a one-off £30m for stadium naming rights option.

As a result of the steep revenue fall, we dropped from 18th to 26th in the Deloitte Money League, which ranks clubs globally by revenue, our lowest ranking since 2013. That said, we are still ahead of recent Champions League semi-finalists Ajax.

Our broadcasting income fell £44m (35%) from £127m to £83m, due to revenue from nine games slipping to 2020/21 accounts ( £26m), rebate to broadcasters ( £6m) and lower merit payments after dropping from 10th to 16th ( £12m). Others will see similar falls when they publish 2019/20 accounts.

However, our broadcasting income could be around £40m higher in 2020/21. It will include £26m revenue deferred from 2019/20, as season extended beyond 31st May accounting close, plus higher merit payment (worth £1.9m a place, so extra £17m if finish 7th) less £2m rebate.

Turning to match day income now and that fell £4m (17%) from £27m to £23m, as we staged two fewer home games and then played five games behind closed doors due to COVID-19. 

Income is eighth highest in the Premier League, less than a quarter of the North London Lilywhites’ £95m after our move to the new stadium.

Our average attendance rose from 58,325 to 59,925 (for those games played with fans), which is second highest in the Premier League, only beaten by the Manchester Devils’ 72,726.

However, the move to London Stadium has not exactly been a money-spinner, partly due to competitive pricing, which has restricted revenue growth: £27m in 2018/19 (pre-COVID) was the same as last season at Boleyn, though a better comparative might be £20m in a “normal” season.

Our commercial revenue fell £2m (5%) from £36m to £34m, comprising £26m commercial activities and £9m retail and merchandising, due to closure of outlets. 

In the last five years, there has been growth of £13m (58%), but this is significantly outpaced in absolute terms by Big Six, e.g. the North London Lilywhites £102m.

Our commercial income of £34m is eighth highest in England, a long way behind the Big Six (the lowest of which is North London Gunners £142m, i.e. four times as much). Again, Everton’s £76m was boosted by a £30m one-off option for stadium naming rights.

Our £10m Betway shirt sponsorship is the seventh highest in Premier League, though still £25m lower than sixth-placed North London Lilywhites. The Umbro kit supplier deal of £4m has been extended, reportedly for £6m to 2025, while sleeve sponsor switched this season from Basset & Gold to Scope Markets.

Our wage bill fell £9m (6%) from £136m to £127m (excluding Pellegrini £3.5m pay-off), due to ‘significant’ deferrals (reportedly 30%) for first team players and senior management.

This means that wages have grown £32m in the last three years, while revenue has fallen £44m.

Our £127m wage bill is around mid-table in the Premier League, though £38m below seventh-placed Everton’s £165m bill. 

This is less than half of the highest wages reported in the Premier League to date for 2019/20, namely at the Manchester Devils ( £284m) and West London Blues ( £283m).

Our reported wages to turnover ratio is 94%, but falls to 91% if severance payment excluded, which is up from 52% in 2017. 

Either way, it’s the highest in the Premier League to date in 2019/20 and the worst since QPR’s 129% in 2013.

As for vice-chairman Karren Brady, she saw her remuneration cut by 10% from £1.136m to £1.027m, which is around mid-table in the Premier League. 

That said, I estimate that she has pocketed around £9m since arriving at West Ham in January 2010, which is not too shabby.

Our player amortisation, the annual charge to expense transfer fees over a player’s contract, rose £3m (4%) to £60m, which means this has nearly tripled in the last five years from £22m in 2015. 

This is, again, mid-table in the Premier League, and still less than half of big spending clubs like the West London Blues, Manchester Blue Moons and Manchester Devils.

However, we have been no slouches in the transfer market, making £108m player purchases in 2019/20, the same as the previous season. 

This was mainly Haller, Fornals, Bowen, Ajeti and Randolph. In addition, Soucek arrived on loan with purchase completed in the 2020/21 books.

It is clear that we have really ramped up our transfer activity ‘to provide funds for the new manager in line with his requirements to enhance the squad’. 

This contributed to gross spend rising to £411m in the last five years, compared to only £129m in the preceding five-year period.

In the five years up to 2019, we had the seventh highest net transfer spend in the Premier League with £209m, only below the Big Six and Everton, though a fair way behind all of them. we were eighth highest in terms of gross spend, also below Leicester City.

Gross debt time now and ours was up from £78m to £120m. Shareholder debt fell £1m to £54.5m after David Gold was repaid £1m, leaving £44m from Sullivan and Gold at 4% interest and £9.5m interest-free from J Albert Smith), but external loans rose £42m to £66m (mainly Rights & Media).

Following the increase, our debt of £120m is eighth largest in the Premier League, though miles below the North London Lilywhites’ £831m (stadium), Manchester Devils’ £526m (Glazer’s leveraged buy-out) and North London Gunners’ £218m (stadium). 

Meanwhile Everton’s £409m and Brighton’s £306m debt is very largely in the form of “friendly” owner loans.

Our interest payment fell from £6.8m to £3.6m, but was still fourth largest in the top flight in 2019/20, including £1m paid to Sullivan and Gold in August 2019. The owners are not paid a salary or dividend, but we have received a lot of interest on our loans.

In light of the pandemic, Sullivan and Gold deferred our £1.8m interest in 2020, but we have trousered around £18m interest on our loans to date, which is in sharp contrast to more benevolent owners, who often provide loans interest-free and convert debt to equity.

Our player purchases have been partly funded by transfer debt, up from £87m to £111m, one of the highest in the Premier League. We are, however, owed £16m by other clubs, so net transfer payable is £94m.

As for operating cash flow, ours was just £1m, but we then spent £35m (net) on player purchases, £2m on infrastructure, £4m tax and £1m repayment of David Gold loan. This was funded by a net £43m increase in external loans, resulting in £2m cash inflow.

Since 2010 majority of cash has come from our operations ( £217m), supplemented by £84m financing from shareholders ( £58m loans and £26m share capital) plus £29m from Boleyn Ground sale. Most ( £257m) was spent on new players, £44m on interest payments and £29m on capex.

Our cash balance increased from £13m to £15m, but this was firmly in the bottom half of the table in the Premier League. However, since these accounts the shareholders (mainly Sullivan and Gold) have invested £30m via a rights issue to support the club during the pandemic.

In conclusion, our finances have been severely impacted by COVID-19, but we have taken steps to cover short-term requirements via the capital injection and new loan (albeit at a chunky interest rate). European football next season would help move the needle.

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