This article analyses West Ham finances in respect of the 2020/21 season.
Season review
West Ham had a fantastic 2020/21 season, finishing 6th in the Premier League. This was the Hammers’ best finish this century and secured qualification for the UEFA Europa League (UEL). The club was unable to replicate this form in the cups however, exiting by the fifth round in both.
West Ham finances looked a lot better in 2021 despite another loss. Losses fell from £65m to £27m. This was West Ham’s third consecutive loss-making year.
While the loss of matchday revenue was significant, the club recorded a chunk of 2019/20 broadcast revenue in the 2021 financial year (due to the delays in the season) which more than offset this.
These losses did not discourage Czech billionaire Daniel Křetínský, who has invested a reported £150m for a 27% stake (valuing West Ham at c.£550m), highlighting the excitement surrounding the Hammers.
West Ham Finances – Revenue
Revenue rose to record levels in 2021. West Ham’s revenue increased from £140m to £193m (38%). This was despite the loss of matchday revenue as broadcast revenue deferrals from the 2019/20 season were recognised.
West Ham recorded other operating income of £4.6m (2020: £1.4m) following a successful £2.5m business interruption insurance claim. Total income hence rose from £141m to £197m (40%).
Matchday
Matchday revenue fell from £22.5m to £0.5m (98%) as West Ham felt the financial impact of no fans in the London Stadium. The return of fans (subject to any enhanced restrictions) should see much of matchday revenue recovered in 2022. West Ham estimate it has lost in excess of £30m in matchday related income in 2020/21. The return of UEL football will provide a further matchday revenue boost due to additional games.
Broadcast
Broadcast revenue nearly doubled from £83m to £163m (98%). West Ham’s 2020 financial year ran to 31 May 2020. Due to the 2019/20 season finishing in July 2020, the club deferred a significant portion of its broadcast revenue and recognised it in the 2021 accounts. This, and finishing 10 places higher in the league while being on live TV more frequently were the reasons for this rise. UEL participation should offset the fall in broadcast revenue due to the absence of deferred broadcast revenue. Further UEL progression and strong Premier League performance will be critical to broadcast revenue levels in 2022.
Commercial
Commercial revenue fell from £34.5m to £29.1m (16%). The sanitary restrictions imposed hurt retail sales while the absence of fans reduced commercial opportunities. UEL participation and the return of fans should boost commercial revenue in 2022.
West Ham Finances – Revenue summary
It was strong revenue year for West Ham. The return of fans and UEL participation gives West Ham a chance of breaking the £200m barrier if performances domestically and in Europe are strong.
West Ham Finances – Operating costs
Operating costs remained relatively stable at £166m as the club showed strong costs control. This had a strong positive impact on the club’s operating profitability.
Wages
West Ham’s wage bill fell slightly from £131m to £129m (1%). Despite a number of arrivals and new contracts, West Ham also sold several players which largely offset each other. The wages to revenue ratio improved, falling from 94% to 67%. This is comfortably within UEFA’s recommended maximum ratio of 70%. Further investment in 2021/22 will likely see wages rise.
Other costs
Other operating costs remained relatively stable at £36m. The return of fans will increase matchday costs which is likely to lead to a rise in other operating costs.
West Ham Finances – Operating costs summary
West Ham kept costs relatively flat in 2021 as it navigated the financial challenges of the pandemic. The club has invested significantly in the squad in 2021/22 which will likely result in a rise in costs which may exceed any revenue growth.
West Ham Finances – Transfers
The Hammers were relatively busy in a cautious transfer market. In came Benrahma (£21m + £4m loan fee), Soucek (£15m), Coufal (£5.4m), Lingard (£2.1m), Alves (£1.4m) and Dawson (loan – £1m) for a combined £49m. Departing the London Stadium were Haller (£20m), Diangana (£12m), Ajeti (£5.0m), Hugill (£3.0m), Cullen (£0.4m) and Snodgrass (£0.1m) for a combined £41m. This resulted in a minor net transfer spend of £8.4m.
Amortisation
Player amortisation charges rose from £60m to £68m (13%) following the player purchases in 2020/21. Further investment in 2021/22 to date should see this figure rise again in 2022.
Profit on player sales
Profit on player sales fell from £23m to £17m (24%) following a slight reduction in player sales in 2021. There has been minimal player sales in 2021/22 to date which will limit the amount of profit recorded in 2022.
Transfer debtors / creditors
West Ham is a net transfer creditor, meaning it owes more in transfer fees than it owes. The Hammers owe £91m in transfer fees while only being owed £27m. This is a net transfer creditor position of £67m. It appears this has not limited spending; however West Ham has deferred some transfer fee payments (such as amounts owed to Frankfurt for Haller) and factored some receipts (such as Haller’s Ajax transfer fee) to improve its cash flow.
West Ham Finances – Transfers summary
The Hammers is typically a net spender in the transfer market. This often means the impact of player trading is negative on profitability, with the occasional large player sales reversing this. 2021 was no different with a large amortisation charge (£68m) and small profit on player sales (£17m). This pattern looks set to continue in 2022.
West Ham Finances – Profitability
It was a third consecutive loss for West Ham as it continues to invest in its playing squad.
Operating profit / loss before player trading
Before player trading, West Ham recorded an operating profit of £32m. This compares to a £25m operating loss in 2020 as revenue grew significantly while cost remained flat. Operating cost growth may exceed revenue growth in 2022 which would reduce operating profits. This will depend on performance domestically and in Europe.
Operating profit / loss after player trading
After player trading, operating losses fell from £60m to £18m (70%). As mentioned, player trading is typically loss-making for West Ham as it is a net transfer spender. The club has made minimal player sales in 2021/22 so this is unlikely to change, although the club does have a number of players that would command considerable fees if sold.
Profit / loss before tax
Net finance costs of £8.6m resulted in a loss before tax of £27m. This compares to a £65m loss in 2020.
West Ham Finances – Profitability summary
West Ham will be hoping to return to profitability soon following three straight losses. However, West Ham is currently enjoying its status as top six challenger and is investing to continue competing. This is likely to mean West Ham will continue to be loss-making in the near future, unless any significant player sales occur.
West Ham Finances – Assets / Liabilities
After another year of losses, West Ham required funding from its owner to continue the current level of investment. The new investment from Daniel Křetínský (a reported £150m for a 27% stake) is a much-needed boost to continue the current positive momentum.
Cash flow
West Ham’s cash reserves increased from £15m to £20m (33%). Cash outflows from player transfers (£33m) and capital expenditure (£1.4m) were offset by cash inflows from operations (£28.4m) and financing activities (£12m). The current owners provided £30m via a capital injection which is hence not repayable. This was used to pay-off some existing debt and ongoing interest costs.
Debt
Debt levels fell from £120m to £110m as the club repaid some bank debt with the owners providing equity finance. West Ham’s debt is split near 50:50 between amounts owed to the owners (£54m) and to bank MSD Capital (£57m). The Hammers agreed a five-year £120m credit facility with MSD Capital in March 2021 which is has used around half of. Since the end of the 2021 financial year, West Ham has received another £20m from this credit facility.
Net debt
Net debt hence now stands at £90m. This is £15m lower than on 31 May 2020 (£105m).
West Ham Finances – Final Remarks
The Hammers are entering an exciting era for the club as it challenges the top six and competes in Europe. The good feeling around the club was showcased by the investment made in the club valuing the club at around £550m, over 2.5 times its revenue. This investment will be necessary as West Ham continue to invest in its playing squad to compete in both the Premier League and Europe. The investments made may result in losses in the next couple of seasons as the club look to bolster its squad, with the pay-off likely to materialise through player sales and strong European and domestic performances.
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