Relegation from the Premier League is the greatest threat to West Ham’s financial wellbeing, according to accounts which reveal that the club’s expenditure on transfers, wages and improved training facilities contributed to an expected pre-tax loss of £28.8m during the last financial year.
The accounts for the financial year to 31 May 2019 also reveal that the co-owners, David Sullivan and David Gold, were paid a combined £2.9m in interest in August 2019 on their loans to the club and that a further £1m was paid to GGI international, a company related to Gold, in respect of a partial repayment of loan capital. As of 31 May 2019 the combined balance of unsecured loans advanced by Sullivan and Gold amounted to £45m.
The highest-paid director at the club was the vice-chairman Karren Brady, whose salary increased from £898,000 to £1.136m.
West Ham are battling to preserve their top-flight status and it is noted within the accounts that staying out of the Championship and maintaining access to the broadcasting money available to Premier League sides is “an absolute necessity for the future wellbeing of the club”. The report adds that “the group’s principal risk remains that of the football club being relegated … with the serious financial consequences which follow”, and that the club prepares budgets, three seasons in advance, containing evaluations and contingency plans relating to the cost of relegation.
Only goal difference is keeping West Ham out of the bottom three before they host Liverpool on Wednesday and Sullivan and Gold are under increased pressure from supporters, who feel that not enough has been invested in the squad. While they pointed to a net spend of £214.4m on signings in the last four years, West Ham have struggled on the pitch since leaving Upton Park for the London Stadium in 2016 and have faced accusations that their infrastructure falls below the standard expected for a club in the richest league in the world.
However West Ham, whose turnover rose by £15m to £190.7m, said that their losses were largely down to increased investment in their squad and facilities at their Rush Green training ground, a site which has come in for criticism recently. Manuel Pellegrini was hired on a three-year contract worth £7m a year in May 2018 and Sullivan, the club’s largest shareholder, said that £107.9m was spent on new players that summer.
Pellegrini is described as a “world-class manager” by Sullivan in the accounts and the Chilean performed encouragingly in his first season, finishing 10th. However results dipped under him this season and the former Manchester City manager was replaced with David Moyes last month amid relegation fears.
Sullivan wrote: “The board made a decision at the start of 2018 to embark on an investment programme that would involve bringing in a world-class manager, investing in better players and making significant investment into the club’s infrastructure.
“As a result of this new strategy we signed Manuel Pellegrini, who has the most successful track record as a manager in the club’s history, invested £107.9m in transfer fees and grew the wage cost to £138.5m for the first team squad, management and staff and invested £4m into facilities at Rush Green (for the first team) and Chadwell Heath (for the academy). We also spent £0.6m in setting up a women’s team in the FA Women’s Super League.”
Sullivan’s statement was written at the start of October, at which point West Ham had hopes of breaking into the Premier League’s top six. Confidence in Pellegrini and his squad’s quality would prove misplaced.
“For the 2019-20 season the board remains determined to maximise the club’s prospects of retaining Premier League status by continuing to make investment in the playing squad with a further net £35.8m being invested during the summer transfer window under the guidance of Manuel Pellegrini. We now believe we have one of the strongest squads and management teams in the Premier League but will always look to continue to invest and build on this strong squad base.”
West Ham, who pay £2.5m a year to rent the London Stadium, said their improved turnover was down to an increase in match receipts, broadcast revenue and stronger performances in retail and commercial. “We reached a satisfactory outcome to most of our legal issues with the owner of the London Stadium and we were able to increase our capacity to 60,000 as a result,” Sullivan said. “We have also now obtained the claret pitch surround which we had been striving to install since we moved into the stadium. This has really improved the look and feel of the stadium.”
West Ham said: “In the last four years the club has spent £214.4m net on new players and has invested £22m on infrastructure, including complete refurbishment of facilities at Rush Green, including a new gym and new training pitches; the academy at Chadwell Heath was totally rebuilt; and almost £2m has been invested in the women’s team.”
