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West Ham's financial situation revealed

Three and a half years ago I wrote my first article for WHTID on West Ham finances for Iain. Today I am back to give an update on the finances after the company accounts were released at the end of Feb.

Hammers leapfrog Everton

West Ham’s newly announced financial accounts show increases in all areas as the club continues on a big upward curve over taking both Everton and Newcastle in terms of financial might with the seventh highest turnover in the Premier League. Last year West Ham sat in ninth position in the Premier League’s turn-over table on £121m behind Newcastle (7th £129m) and Everton (8th £126m).

Last year Everton earned £82.5m from TV money, £17.6m from ticket sales, £9.3m from retail and £12m from commercial activities which saw a £4m decrease in turn-over to £121.5m. Newcastle were relegated to devastating financial consequences.

Record breaking figures

The Hammers turnover increased 17.7% to £142.1m and within that figure ticket sales for the last season at the Boleyn Ground rose to an impressive £26.9m

TV rights income grew to £86.7m and Commercial and sponsorship revenue was up by 31% to £19m while Retail and merchandising sales grew by 29% to £9.3m.

The club managed to record an operating profit of £31.5m excluding player trading but this was reduced to a more modest profit of £1.2m before taxation. The club recorded a £4.8m loss on the books when other factors where included after spending £53.3m on bringing in new players which saw us take on a total wage bill £84.7m and invest £4m in Rush Green training ground. A further £45.7m was spent on players during the 2016/2017 season.

The external bank loans were completely paid off in July 2016 following the sale of the Boleyn Ground with the accounts claiming an £8m profit in the sale.

The Boleyn Ground and land was sold to developers for £38m with £15m going to pay off bank debts that were mortgaged against it and a further £15m going to stadium owners LLDC to contribute to the £323m transition costs of the former Olympic Stadium.

Playing Catch-up

While it is great that the Hammers have jumped up to 7th spot they remain a long way behind the top six in terms of financial might. Manchester United leads the pack with £515.3m followed by Manchester City on £392m, Arsenal are third on £350m and Chelsea fourth on £329m.

Liverpool and Spurs have yet to announce their figures but Liverpool recorded figures of £298m in 2015 while Spurs had a £196m turnover in 2015 so we are unlikely to catch them up any time soon.

Brady pay rise

West Ham owners rewarded West Ham Vice Chairman, Karren Brady with a 40% pay increase although she remains a long way behind the club’s top earners.The highest paid West Ham director employed by parent group WH Holding was paid £907,000 up from £646,000 in 2015. Her £261,000 increase came in the last season at the Boleyn Ground as the Hammers prepared to move the London Stadium.

In 2011 after the Sullivan and Gold takeover, the highest West Ham paid director earned £256,000 but that was increased to £427,000 in 2012.

In 2013 Karren Brady earned £1.63m which included a £1m bonus for winning the London Stadium tenancy deal although the bonus payments are thought to have been staggered over five years. In 2014 her salary returned to £636,000 with a modest £10,000 rise in 2015 to £646,000.

Her £907,000 yearly pay packet pales into insignificance given those earned by her London Premier League rivals. Spurs Chairman Daniel Levy and Arsenal’s CEO Ivan Gazidis for example both paid themselves £2.6m per year in 2016. And with the average Premier League footballer earnings £44,000 per week (or £2.2m per year and average squad players earn well over £1m).

Debt situation eases

Icelandic shareholders CH Holdings and David Sullivan acted as joint bankers in 2013 loaning over £32m to the club between them. The remaining £14.76m repayment was paid back in full in July to both shareholders with interest who stepped in and acted as banks after high street banks previously turned the club down.

The club also paid off the first repayment of shareholder loans including seven per cent interest last August worth £4.2m to the owners Sullivan.

The accounts say the first repayment to Gold and Sullivan relate to shareholder loans dating back to 2011. The shareholders have loaned £49.2m in total between them which has been bumped up to £61.5m with a further £12.3m of accrued interest. Although it appears the remaining £57.3m of shareholders loan was due to be paid back on 1st January 2017, a post financial year note on 3rd October last year says the pay back of the remainder of the share holders loans will now be deferred until 1st January 2020.

Despite being bank debt free the club continued to loan money from pay day lenders tied to their TV money income. The Hammers repaid £30m of loans from JG Funding in May last year but took out a new credit facility with lenders Media and Rights Funding worth another £30m which is payable by July this year through direct payments by the Premier League to the lenders.

The Premier League are looking to outlaw offshore lenders and while Media and Rights Funding is registered with the FCA it’s funding comes from the British Virgin Islands so it remains to be seen how how these arrangements can carry on for.

Onwards and upwards

The figures are moving in the right direction. Next year’s figures which are unlikely to released until next February are likely to smash the £200m barrier! In those accounts will be the £38m income for the sale of the Boleyn ground, the first year of the new bumper TV deal worth £128m for finishing in seventh spot, ticket sales at the London Stadium is expected to rise by £13m to around £40m. You would expect commercial and sponsorship to rise by another 30% to around £25m and retail to double to £19m in an enlarged and expanded mega store. Not forgetting the £25m we received for the French man.

Incredibly our turnover for the year ending 31st May 2017 could come in at a staggering £275 million. In 2012 our turnover was just £46m following relegation.

Always happy to answer financial related questions to the best of my ability in the comments section below.

Sean

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