Watford suffered losses on and off the pitch in 2019-20

WATFORD may have bounced back to the Premier League at the first attempt in 2020-21, but promotion will also help them to improve their financial position after the Hornets made, by their own standards, a hefty loss in their relegation campaign of 2019-20.

Watford’s promotion was obviously assisted by parachute payments of around £ 40 million, but 2020-21 may present challenges of its own as the Hornets went through virtually an entire season without spectators at their Vicarage Road stadium.

Watford made a £ 36 million pre-tax loss in the season they went down, a £ 46 million swing from their £ 10 million profit in 2019. The change of fortunes can be attributed to lower broadcasting and matchday income as well as a higher wage bill and compensation paid to sacked managers.

Although Watford’s losses are substantial by their own standards, they are small compared to other Premier League clubs. Everton, for example, made a loss of £ 140 million and Aston Villa just under £ 100 million. Watford’s loss is their highest deficit over the past decade.

Watford’s overall revenues fell to £ 120 million, a fall of 19% on 2018-19. Broadcasting income dropped to £ 95 million from £120 million, a 20% decline, while matchday was down 21% to £ 7 million. Commercial activity, at £ 17 million, was 6% lower.

Although income, understandably given the economic backdrop, was down, Watford had their fourth consecutive £ 100 million-plus season. In 10 years, Watford’s income has increased more than tenfold, from £11.3 million in 2011 to £ 120 million in 2020.

Watford generated £ 18 million profit from player sales, thanks to the transfer of Dodi Lukebakio to Hertha Berlin (£ 18m) and Obbi Oulare to Standard Liege (£ 3m). This figure was dwarfed by most of Watford’s Premier rivals. However, Watford’s activity in player trading has increased over the past five years. In 2019-20, they spent £ 66 million on new talent, double the amount spent by Liverpool, but only about a third of what Manchester United, Arsenal and Manchester City paid out.

Even though Watford were relegated, their wage bill rose by 14% to £ 96 million, representing 80% of earnings, a rise from 57% in 2018-19. In 2011, Watford’s wages came to £ 9.3 million versus total revenues of £ 11 million.

Watford claim they lost around £ 10 million of income due to the pandemic, but the club has made some adjustments to accommodate the current climate. A loan of £ 5.6 million from the club’s parent company, Hornets Investments, has been written off. Furthermore, two loans of £ 55 million and £ 25 million have been refinanced and consolidated with XXIII Capital at the rate of LIBOR plus 5.35%. The club’s overall debt has gone up to £ 111 million of which £ 75.8 million is owed to Gino Pozzo, Watford’s owner. Net debt was up from £ 74 million to £ 93 million.

Although the figures could have been worse, Watford will be relieved to be back in the Premier for 2021-22, a year in which further financial horrors from the pandemic will surely be unleashed on football. As always, the friendly and popular Hertfordshire club will be welcomed back.

Photo: Alamy

QPR looking more optimistic, despite loss

QUEENS PARK Rangers have released their 2019-20 financial report and like many clubs, revenues were severely hit by the covid-19 pandemic. QPR’s turnover, which no longer benefits from parachute payments, reduced from £ 34.6 million to £ 18.3 million, a drop of 48% on 2018-19. The club’s income is now in the lower half of the Championship.

QPR lost £ 16.4 million after tax, an increase of around £ 6 million on 2018-19. Over the past decade, the club’s annual losses have totalled around £ 250 million, although in recent years, they have been lower than the period between 2011 and 2015. Revenues peaked at £ 86 million in 2015, more than 4.5 times the current level. QPR’s loss for 2018-19 is relatively modest compared to their Championship rivals – Stoke City, for example, lost £ 87 million.

Although matchday cash predictably fell by 26% to £ 4 million ( 2019-20 gates averaged 13,721) and commercial revenues fell by 20% to £ 5.8 million, the biggest drop was the 72% decline in media income, from £22 million to £ 8.4 million, which was largely attributable to the termination of parachute payments. QPR’s TV income was their lowest from this revenue stream since 2011.

But QPR appear to be in better shape than a few years ago and they are currently free of Financial Fair Play concerns. But with losses continuing, the club is very dependent on the continued support of its key shareholders, Total Soccer Growth Sdn Bhd and QPR Asia Sdn Bhd, to ensure it remains a going concern.

The club managed to cut its costs, including a 16% reduction in wages to £ 20 million. QPR’s wage bill is one of the smallest in the Championship, the weekly average some 30% below the division’s overall average.

With the fall in revenues, the wage-to-income rate rose from 69% to 109%. This is still considerably below 2013 and 2014 when the rate was 129% and 195% respectively. It is also lower than the Championship average of 130%, a precarious figure if ever there was one.

Similarly, the club’s net debt is now around £ 52.3 million, way lower than the 2011-15 period when net debt climbed as high as £ 193 million, but still significant. Cash has declined, however, and stands at a rather low £ 1.1 million compared to more than £ 3.5 million a year earlier. 

QPR generated £ 6 million in profits from the sale of Luke Freeman (fee £ 5m), Massimo Luongo (£1m) and Darnell Furlong (£ 1.53m). On the other hand, their total expenditure on players, at £ 55,000 , was the lowest in the Championship.

QPR’s future depends on a number of factors, but the club is still keen to move away from their current home. They finished ninth in the Championship in 2020-21, but the financials for the recently-completed season may be challenging given the fact that a whole season has passed with negligible matchday income. On the positive side, though, 2020-21 will include transfer income received for the sale of Eberechi Eze to Crystal Palace for a record fee of £ 17 million.

Photo: GOTP