By Sean Whetstone
Last week, West Ham released their financial accounts for last season, and the figures revealed some interesting revelations.
The headline figure of a net profit of £57.2m is misleading and is mostly due to an accounting anomaly: profit from player sales is recognised within one financial year, but the purchase of players is spread over five years. Before last season started Declan Rice was sold to Arsenal for £100m with £5m of add-ons spread over four years.
If only one-fifth of the profit was recognised in the first year, that £20m of income for Rice for year one would have quickly registered as a loss of £43m instead of a profit.
This current season is looking bleak due to that same accounting anomaly and when the accounts are filed at companies house next January they are likely to register a loss of between £60-80m.
West Ham Transfers
The accounts also reveal West Ham spent another £110m on net transfers last summer with a further £10.5m of potential add-ons due.
It is the transfer spending that is the concern and cash flow remains a problem last summer, this January and will again next summer as we spend money we don’t yet have.
The club continue to borrow money from Barclays banks secured against land and leases re-enetered a temporary loan repayable next summer of £45m of which £5m is earmarked for Rush Green training ground improvements. That said interest payable last season has reduced from £18.4m to £8.3m a decrease of 55%.
Probably the biggest revelation is tucked away in notes 31 in the accounts where the club admits to selling future transfer payments due from other clubs to get hold of cash up front last summer. West Ham sold £69m of transfer payments for £64m paying £5.1m in interest as part of the deal. This is equivalent to a payday loan and the club did something similar last year selling £30m of money due for Declan Rice from Arsenal for a fee.
Player amortisation, the method player purchases are accounted for over several years is up to £65.3m from £83.4m an increase of 28%, another worrying trend.
Overall the club transfer approach to transfers is risky and is not financially sustainable long term.
Overall turnover is up 14% to £270m which is a new club record
Ticket revenue was up to £45m which is a 9% increase driven by the European Conference league win and more home games.
TV broadcast was up to £167m an increase of 13% from the previous season mostly due to finishing ninth place in the Premier League.
Commercial and Sponsorship driven by the Hammers European run up to £58m an increase of 21%
Retail and merchandising was up to £16.1m up by 24% largely due to winning a European trophy.
Wages are up to £161m an increase of 18%, a new club record with wages to turnover now 60% up 2% on the previous season.
Other expenses are also up to £60.2m an increase of 27% on the previous season.
Profit and sustainability rules (PSR) state that Premier League clubs may only lose a maximum of £105million in total across a three-year period. If they breach this, they face points deductions or fines. West Ham has no concerns about these current PSR rules as they have made £50m profit over the last three years on paper at least.
Spending Cap
Premier League clubs voted last April for some form of a spending cap to replace PSR for the 2025-26 season. One option is ‘anchoring’, capping teams’ transfer and wage spending at five times as much as the bottom club’s revenue the previous season. Another is limiting spending on transfers, salaries and agent fees to 85% of total revenue, which reduces to 70 per cent for teams in Europe due to Uefa’s own rules. If that was in place for this season West Ham’s spending transfers, salaries and agent fees would be limited to £229.5m.
Sheffield United were the team to finish bottom last season so their turnover would have been used as the base turnover figure to multiply by five as the anchoring figure if the new PSR rule had been bought in this season.
The bottom line is that we are seventh largest by revenue so if all clubs were run equally proficiently we should bump along at around seventh most successful.
We seem to bump along with one poor decision after another after another anything but proficiently.
Who cares really it is the same every time ohhh we do not have much money we need to sell to buy etc etc….do us a favour sell up and let the club be run properly and if it takes a relegation or two to get these dirty money grabbing non football interested scumbags out the club then so be it…..i have watched West ham for 60 years plus and i have never been so detached from them as a supporter as i am now the results just get a shrug of the shoulders now and that is just awful…. Sullivan and his cohorts need to go they are killing the club.
Should’ve sacked Moyes last year and got a decent manager instead. Then we might still be in Europe. Its a football club Sully. Not a dirty porno film stall in Romford or Stratford market
I don’t think it’s an accounting anomaly. We just blew the Rice cash on assets worth only a fraction of what we paid for them, and now we are back to reality with a bump.
The board voted for these rules to avoid putting more money in. All the clubs did this.
But we don’t even own our own ground, so are only other assets are future income which the board have sold at a massive loss. The family silver has been sold and we are 14th in the league after Xmas. Great.
If all the leagues banned clubs from paying agents fees and signing on bonuses the game might be a lot healthier.
As for the finances, the club always plead poverty, the numbers are what they are, I wonder where we would be if we adopted Brighton’s model of securing younger talent with sell on potential and giving our youth team opportunities for a few seasons.
What the fuck, sorry lost me there glad my household bills aren’t worked out like that , my head would explode.
Sean. Thanks for the review and insight.
It is clear to everyone that we have wasted tens of millions on bad transfer decisions, every fan knows the list of names and this must change.
Little wonder we fail to attract new investment and the Gold shares are not selling.
Smoke & mirrors!
Is a spending cap such a good idea? Will it not damage the premier league brand and lead to the premier league no longer being the premier league. Will the best players go and play somewhere else like Saudi Arabia or wherever the money is and that becomes the league the world wants to watch.