Thread by @SwissRamble

West Ham’s 2018/19 financial results covered a season when they finished 10th in the Premier League and were eliminated in the 4th found of both the FA Cup and Carabao Cup. Manuel Pellegrini replaced David Moyes as manager in May 2018. Some thoughts in the following thread #WHUFC

#WHUFC swung from £18m profit before tax to a £28m loss, a £46m deterioration, despite revenue rising £15m (9%) to a club record £191m, as profit on player sales fell £17m to £13m and investment in the squad led to a £45m increase in expenses.

The main driver of #WHUFC £15m revenue increase was broadcasting, which rose £9m (7%) to £127m, due to a better Premier League position. There was also useful growth in the other revenue streams: commercial was up £4m (12%) to £36m, while match day was up £3m (11%) to £27m.

However, following further investment in the squad, #WHUFC wage bill increased £29m (27%) to £136m and player amortisation rose £16m (40%) to £57m. On the other hand, there was no repeat of prior season’s £1.6m exceptional item for pension scheme revaluation.

Four of the six Premier League clubs that have published their 2018/19 accounts to date have lost money. Although #WHUFC £28m loss is clearly not great, it is much better than #EFC and #CFC, who had losses over £100m. Both Manchester clubs posted profits: #MUFC £27m & #MCFC £10m.

#WHUFC only generated £13m profit from player sales (including £2m from loans), which is firmly in the bottom half of the Premier League. For some context, #CFC made £60m profit in 2018/19 and #LFC £124m in 2017/18. West Ham’s sales included Kouyaté, Burke and Quina.

#WHUFC £28m loss is the highest since the £37m reported in 2008, though that was inflated by £26m exceptional expenses for a breach of Premier League rules in transfers of Tevez and Mascherano. Before last season, they had been profitable in four of the last five years.

#WHUFC rarely made big money from player sales until last three seasons, though they registered £28m in 2016/17 (Payet & Tomkins) and £30m in 2017/18 (Ayew, Sakho & Nordtveit). This season should also be quite high, due to sales of Arnautovic, Obiang, Chicharito and Fernandes.

The adverse impact of numerous exceptional items that historically have plagued #WHUFC accounts is largely a thing of the past, though 2019/20 will include a pay-off for Pellegrini. The 2017/18 accounts benefited from £8.7m profit on sale of the Boleyn Ground.

#WHUFC EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), considered as a proxy for cash operating profit, as it excludes player sales and exceptional items, continued its decline, as it fell from £37m to £23m. This was as high as £58m two years ago.

Following the decrease, #WHUFC EBITDA of £23m is mid-table in the Premier League, just ahead of #LCFC. For some perspective, this is around an eighth of #MUFC’s amazing £186m. However, a more valid comparison might be with #EFC, whose EBITDA is minus £15m.

Following a reduction in 2017/18, #WHUFC revenue bounced back to £191m in 2018/19, a club record. This means that revenue has grown by £49m (34%) in last 3 years, though most of that increase (£41m) is due to the centrally negotiated TV deal. Commercial up £8m, match day flat.

Thanks to the increase, #WHUFC revenue of £91m is now 7th highest in the Premier League, having overtaken #EFC £189m and #NUFC £178m (though the Geordies have not yet published 2018/19 accounts). Massive £200m gap to the Big Six (#AFC £393m).

According to the Deloitte Money League, #WHUFC have the 18th highest revenue in the world, largely due to the impact of Premier League TV money, as they are one of only 2 clubs in top 20 that did not play in Europe. More revenue than Champions league semi-finalists Ajax £176m.

#WHUFC £123m Premier League TV money was £6m more than prior season, due to £6m higher merit payment (10th place vs. 13th) and £2m overseas distribution, partly offset by £1m lower facility fees (broadcast live 16 times vs. 17). Received £853m from the PL in the last 14 years.

Although a substantial 67% of #WHUFC revenue comes from broadcasting, they actually have the most balanced revenue mix outside of the “Big Six”. In fact, 13 of the clubs in the Premier League earn more than 70% of their total income from TV.

#WHUFC qualified for Europa League in 15/16 and 16/17, but failed to reach the group stage on both occasions, thus earning peanuts. In contrast, last year English clubs earned £80-100m in Champions League and £35-40m in Europa League, which is a big reason for the revenue gap.

If #WHUFC do get relegated, their revenue will dramatically fall, despite receiving parachute payments for 3 years. TV money in Premier League was £123m, while Championship would be £46m (year 1), £38m (year 2) and £19m (year 3). That said, other clubs only get around £8m.

Match day income rose £3m (11%) to £27m, partly due to 1 more home game. However, the move to the London Stadium has not exactly been a money-spinner with £27m revenue around the same as last season at Boleyn, though a better comparative might be £20m in a “normal” season

#WHUFC average attendance has shot up from 35,000 to 58,000, partly due to very competitive pricing, which has obviously restricted revenue growth. In terms of revenue, West Ham have the 7th highest in the PL, but less than half of 6th placed #MCFC (£55m).

#WHUFC attendance of 58,325 was the third highest in the Premier League, only surpassed by #MUFC and #AFC. Capacity increased to 60,000 in 2019, though club looking to further expand, as season ticket waiting list is reportedly 50,000.

#WHUFC commercial revenue rose £4m (12%) to £36m, comprising £27m commercial activities and £9m retail and merchandising. This was the 8th best in the top flight, but a long way behind the Big Six, e.g. #AFC £75m more, and overtaken by #EFC £41m (partly due to owner sponsorship).

Since 2013 #WHUFC commercial income is up 81% from £20m to £36m, but absolute growth of only £16m means that the gap to the leading clubs has actually widened, e.g. #MUFC grew by £123m over the same period to an incredible £275m. Stadium naming rights are still up for grabs.

#WHUFC shirt sponsorship with Betway was extended to 2025 at £10m, which is the 7th highest in Premier League, though still £30m lower than 6th placed #THFC. Umbro kit supplier deal is valued at £4m a year (runs to 2023), while the sleeve sponsor is Basset & Gold.

#WHUFC wage bill shot up £29m (27%) from £107m to £136m, increasing the wages to turnover ratio from 61% to 71%, despite the revenue growth. This ratio was only 52% in 2017. Wages have risen £51m in just three years (about the same as revenue).

After the increase in #WHUFC wage bill to £136m, this is now 8th highest in the Premier League, only £12m below #THFC £148m (though this should increase in 2018/9). Perhaps a better comparison is Everton, whose wages are a chunky £24m more than the Hammers.

#WHUC wages to turnover ratio of 71% is their worst since they were last in the Championship in 2012 (90%). This is a lot higher than the elite clubs, e.g. #MUFC 53%, #MCFC 59% and #CFC 64%. On the other hand, significantly better than #EFC 85%.

Vice-chairman Karren Brady saw her remuneration increase by 27% from £898k to £1.136m, which is around mid-table in the Premier League. That said, I estimate that she has pocketed around £8m since arriving at #WHUFC in January 2010, which is not too shabby.

#WHUFC player amortisation, the annual charge to expense transfer fees over the length of a player’s contract, climbed £16m (40%) from £41m to £57m, reflecting investment in the squad. Significantly higher than the £14m in the first season back in the top flight in 2013.

Following the increase, #WHUFC player amortisation of £57m is the 8th highest in the Premier League. As an interesting comparative, #EFC£95m is around two-thirds more, which reflects the Blues’ major investment under their new owner, Farhad Moshiri.

However, #WHUFC have been no slouches in the transfer market, making £108m player purchases in 2018/19 (mainly Felipe Anderson, Issa Diop, Andrii Yarmolenko and Lukasz Fabianski), which was more than #MUFC £103m and #MCFC £87m. That makes a striking £250m in the last 3 seasons.

It is clear that #WHUFC have really ramped up their transfer activity with average annual gross spend rising to £77m in last 4 years against £25m in previous 6 years. This has continued in 2019/20 with the arrivals of Sébastien Haller, Pablo Fornals, Jarrod Bowen & Albian Ajeti.

#WHUFC net debt increased by 90% 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% 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 #WHUFC, 2019 increase was “due to the sizeable investment in the playing squad and first team management”. In fact, the Rights & Media Funding Ltd bank loan was repaid in July, but replaced by bigger £39m loan, though £1m repaid to David Gold.

#WHUFC 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, #MUFC and #THFC have around £500m debt, followed by #EFC £337m, #BHAFC £280m and #AFC £217m.

Sullivan says #WHUFC were £110m in debt when they took over (“£50m owed to banks, £40m to other clubs and the settlement to Alan Curbishley”). Interestingly, using his definition of external debt, club now owes £111m. Including owner debt, it’s actually risen from £120m to £165m.

#WHUFC (cash) interest payment of £6.8m was the 4th 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 trousered a hefty £18.7m interest on their loans, which is in sharp contrast to more benevolent owners, who often provide loans interest-free and also convert debt to equity.

#WHUFC generated a healthy £30m cash from operations, but then spent £49m (net) on purchasing players, invested £5m in facilities (Rush Green and Chadwell Heath) and paid £7m interest. This was part funded by £13m of new bank loans, while cash balance fell £18m.

Since 2010 majority of cash has come from #WHUFC operations £215m, supplemented by £81m financing from shareholders (£55m loans and £26m share capital) plus £29m from Boleyn Ground sale. Most (£222m) was spent on new players, £65m on loan/interest payments and £27m on capex.

#WHUFC have invested big money to take them to the next level, but are currently more concerned about the “serious financial consequences” of relegation. As the Board stated, “retention of our (Premier League) status is an absolute necessity for the future wellbeing of the club.”