Post by QPR Report on Sept 3, 2009 6:34:04 GMT
Guardian/Matt Scott - September 3, 2009
West Ham accounts reveal loss of £37m• West Ham debts and liabilities close to 100m• Accounts unveil 'fundamentally flawed' strategy
The shocking extent of West Ham United's financial crisis during the Bjorgolfur Gudmundsson era has been laid bare in the clubs's accounts, which have been obtained by the Guardian. The documents reveal a business strategy that, in the opinion of the club's finance director, Nick Igoe, was "fundamentally flawed".
The accounts set out a loss of more than £37.4m for the year ending 2008, which was covered by an injection of £30.5m of cash from the holding company of the former owner, Gudmundsson, and £17m of new loans negotiated with the banks in January 2008. Now that the club's parent company, CB Holding, is effectively a subsidiary of Iceland's now defunct bank Straumur, even a marginal loss this year could result in a return to the 2008 crisis.
In addition, the Hammers have net debt and contingent liabilities approaching £100m. But since West Ham are also yet to file their May 2009 accounts, the true current picture has not been presented. It is believed five syndicate banks have together raised their loans to the club to £50m and whether the auditors, Deloitte, will sign off the most recent accounts is an important consideration.
West Ham have embarked on a series of cash-saving measures but, despite net transfer proceeds in the 12 months to 5 June this year of £11.67m, troubled times still lie ahead.
Of paramount concern is the stark admission that the club had breached their debt covenants. This meant that the five banks that had then loaned them more than £20m could have demanded immediate repayment, a move that would have plunged the Upton Park club into administration. Only what the board has termed the "goodwill" of those banks prevented West Ham becoming the first Premier League club to suffer that fate.
"The scale of operating losses and wages caused the group to breach certain banking covenants in 2007-08," Igoe said. "Although the group's banking syndicate [later] waived these breaches, a business strategy which relies on the goodwill of the group's bankers to waive covenant breaches is fundamentally flawed."
At that time the annual wage bill amounted to £63.3m on turnover of £81.5m, a ratio of almost 78% that the club recognises as being "unsustainable". Only the removal from the wage bill of players such as Craig Bellamy, Anton Ferdinand, Bobby Zamora and Matthew Etherington has allowed the club to continue trading.
There are further financial pressures off the pitch that will continue to hit home. The collapse of the former shirt sponsor, XL, is estimated to have cost the club £4m. The settlement with Sheffield United after the Carlos Tevez inquiry has added another £21m in future liabilities, to be paid in four equal tranches each year to February 2013.
Add to that the £17.8m that the club owe following Gudmundsson's spending spree and it is apparent that the Hammers remain on shaky ground. "It is clear with the benefit of hindsight that not all of the investment undertaken in the playing squad in the period under review was prudent," Igoe said. "West Ham United purchased three high-profile players in 2007-08 at a combined cost of £20m with total annual wages in excess of £12m. Those players made 36 starting appearances between them in the season."
Those three players were Freddie Ljungberg, Bellamy and Kieron Dyer. While their arrivals characterised the profligacy of Gudmundsson's stewardship of the club, their injuries characterised the 2007-08 season and it was remarkable that the club finished in mid-table.
However Igoe qualified that by adding: "Whilst creditable, the 10th place finish has to be viewed in the context of a £21m increase in wages [almost exclusively player wages] and a further £15.7m net investment in transfer fees, following the £29.9m investment in the previous season. Again ignoring exceptional expenses, the group recorded a loss before player trading and after interest of £7.4m."
www.guardian.co.uk/football/2009/sep/03/west-ham-financial-crisis-37m-loss
West Ham accounts reveal loss of £37m• West Ham debts and liabilities close to 100m• Accounts unveil 'fundamentally flawed' strategy
The shocking extent of West Ham United's financial crisis during the Bjorgolfur Gudmundsson era has been laid bare in the clubs's accounts, which have been obtained by the Guardian. The documents reveal a business strategy that, in the opinion of the club's finance director, Nick Igoe, was "fundamentally flawed".
The accounts set out a loss of more than £37.4m for the year ending 2008, which was covered by an injection of £30.5m of cash from the holding company of the former owner, Gudmundsson, and £17m of new loans negotiated with the banks in January 2008. Now that the club's parent company, CB Holding, is effectively a subsidiary of Iceland's now defunct bank Straumur, even a marginal loss this year could result in a return to the 2008 crisis.
In addition, the Hammers have net debt and contingent liabilities approaching £100m. But since West Ham are also yet to file their May 2009 accounts, the true current picture has not been presented. It is believed five syndicate banks have together raised their loans to the club to £50m and whether the auditors, Deloitte, will sign off the most recent accounts is an important consideration.
West Ham have embarked on a series of cash-saving measures but, despite net transfer proceeds in the 12 months to 5 June this year of £11.67m, troubled times still lie ahead.
Of paramount concern is the stark admission that the club had breached their debt covenants. This meant that the five banks that had then loaned them more than £20m could have demanded immediate repayment, a move that would have plunged the Upton Park club into administration. Only what the board has termed the "goodwill" of those banks prevented West Ham becoming the first Premier League club to suffer that fate.
"The scale of operating losses and wages caused the group to breach certain banking covenants in 2007-08," Igoe said. "Although the group's banking syndicate [later] waived these breaches, a business strategy which relies on the goodwill of the group's bankers to waive covenant breaches is fundamentally flawed."
At that time the annual wage bill amounted to £63.3m on turnover of £81.5m, a ratio of almost 78% that the club recognises as being "unsustainable". Only the removal from the wage bill of players such as Craig Bellamy, Anton Ferdinand, Bobby Zamora and Matthew Etherington has allowed the club to continue trading.
There are further financial pressures off the pitch that will continue to hit home. The collapse of the former shirt sponsor, XL, is estimated to have cost the club £4m. The settlement with Sheffield United after the Carlos Tevez inquiry has added another £21m in future liabilities, to be paid in four equal tranches each year to February 2013.
Add to that the £17.8m that the club owe following Gudmundsson's spending spree and it is apparent that the Hammers remain on shaky ground. "It is clear with the benefit of hindsight that not all of the investment undertaken in the playing squad in the period under review was prudent," Igoe said. "West Ham United purchased three high-profile players in 2007-08 at a combined cost of £20m with total annual wages in excess of £12m. Those players made 36 starting appearances between them in the season."
Those three players were Freddie Ljungberg, Bellamy and Kieron Dyer. While their arrivals characterised the profligacy of Gudmundsson's stewardship of the club, their injuries characterised the 2007-08 season and it was remarkable that the club finished in mid-table.
However Igoe qualified that by adding: "Whilst creditable, the 10th place finish has to be viewed in the context of a £21m increase in wages [almost exclusively player wages] and a further £15.7m net investment in transfer fees, following the £29.9m investment in the previous season. Again ignoring exceptional expenses, the group recorded a loss before player trading and after interest of £7.4m."
www.guardian.co.uk/football/2009/sep/03/west-ham-financial-crisis-37m-loss
