Richarlison sale and ‘dispute’ settlement help Watford to post £10m profit

By David Owen

February 10 – Watford, the Premier League club based in London’s commuter-belt and controlled by Gino Pozzo, have bounced back into profit after a 2018-19 season that saw them finish safely in mid-table and reach the final of the FA Cup.

The Hornets, currently 19th in the wake of a dismal start to the current campaign, posted a pre-tax profit of £9.8 million for the year to end-June. This compared with a restated £31 million loss the previous year.

A number of factors contributed to the improvement. Turnover rose not far off £20 million to £147.6 million. Notwithstanding the cup run, the club attributed this mainly to a higher league finishing position of 11th against 14th in 2017-18.

Player numbers were cut from 75 to 65, contributing to a reduced salary bill, with amortisation/impairment also declining, from £41.5 million to £36.3 million, at a time when these costs have been weighing down the financial performance of many rival clubs.

There was also £4.58 million of “other” operating income. The vast majority of this – £4.5 million – was said rather vaguely to relate to “amounts receivable in settlement of a dispute”. This seems likely to relate to former manager Marco Silva, with Everton widely reported last February to have agreed to pay compensation of around £4 million.

The biggest contribution to the improved result, however, was the transfer of star forward Richarlison to Everton for a reported £35 million. This was largely responsible for a profit on player sales of £22.3 million, versus just £2.9 million the previous year. The Brazilian stayed with Watford for only a year, so the bulk of the approximately £11 million they are thought to have paid for him would still have been on the books when he moved on in July 2018.

According to the cash flow statement, the Hornets received £22.3 million for the disposal of “intangibles” (players) in 2018-19). They spent £60.3 million. Arrivals included notably Gerard Deulofeu, but also veteran goalkeeper Ben Foster, who has been outstanding since coming from West Brom.

While both matchday and commercial income increased, the club remains overwhelmingly dependent on media and broadcasting income. This amounted to close to 84% of overall turnover.

At the year-end, Watford owed £85.7 million in loans and £3.6 million of unpaid interest to Hornets Investment Limited, its immediate parent. Subsequently, however, two loans totalling £80 million have been refinanced. While £10 million of this was repaid, the remaining £70 million now attracts interest of 5.35% above LIBOR. The senior creditor on this loan is said to be XXIII Capital.

During the year, the company was charged £5.3 million, up from £4 million, in respect of transfer fees by Udinese Calcio, a company under common control. Three players, Stefano Okaka, Ben Wilmot and Marvin Zeegelaar are thought to have gone to Udinese on loan during the year.

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