The annual report and financial statements for last season are being presented to shareholders, the details of which are included here.
With a new management team, a former player joining the board for the first time in the club's history, and massive redevelopment work ongoing at the Boleyn ground, the report and statements reflect how the club is moving forward, as well as explaining the difficulties of last season.
While change can often be difficult, it is sometimes necessary.
The following details explain why there are grounds for optimism that restructuring on the scale being undertaken should be of benefit to everyone associated with the football club.
CHAIRMAN'S STATEMENT
The year under review was, undoubtedly, a difficult one and, whilst
we successfully completed our 37th season in the top flight of
English football during the 43 seasons since 1958-59, the team won
just one of its first ten games in The Premier League and four of
its last twenty two. Only twice in 75 years of League
football have we had a worse home record than last season and we
also lost at home in both cup competitions after two excellent away
wins in the FA Cup at Manchester United and Sunderland.
The year also saw the end of Harry Redknapp's seven year tenure as Team Manager and I would like to thank both Harry and his assistant, Frank Lampard, for all their efforts on our behalf. Throughout Harry's stewardship we maintained our status as a Premier League club and that was, of course, extremely important. We also achieved a very creditable 5th place in 1998/9 and thereby qualified for the UEFA cup via the Intertoto cup but it has to be said that the team Harry took over from Billy Bonds had just finished 13th in a 22 team Premier League with 52 points and, after a seven year roller coaster ride, he left us with a team which finished 15th (out of 20 teams) with 42 points.
In June, Glenn Roeder was appointed the 9th manager in the club's history. A number of candidates were interviewed in connection with the vacancy but Glenn's ideas on coaching and fitness and the players he would like to bring to the club were particularly impressive. Having worked with the first team squad as a coach for the last two years he also had the respect of the senior players and this was an important consideration in making the appointment. He has been joined by Paul Goddard, who made 224 appearances for West Ham United, as his assistant and Ludek Miklosko, who made 315 appearances for the club, as goalkeeping coach. We wish all three every success in their new appointments.
I am also delighted to welcome Trevor Brooking CBE to the Board of West Ham United Football Club plc. Trevor, who needs no introduction from me, having played 636 times for the club and 47 times for England, is the first former player to join the board and I am sure his football and business knowledge will prove invaluable.
Off the pitch, season ticket sales increased to a record level and ground occupancy rose to a remarkable 97.4% of stadium capacity. We commenced the development of the new Dr Martens stand, which will contain 10,000 additional seats, 70 boxes (which convert into hotel rooms on non-match days), superstore, museum, public house, educational facilities and top quality hospitality lounges for 1,100 guests. We have viewing areas for disabled supporters throughout the new stand and, as part of the redevelopment, have built and donated a primary school to the local community. Our museum will house the Bobby Moore, Sir Geoff Hurst and Martin Peters collections, which include, of course, three World Cup winners' medals. The new stand has been financed mainly by a long term bank loan and, whilst this will place some pressure on our balance sheet, the expansion in our capacity and corporate facilities is essential. Before the development commenced we had one of the smallest stadia in The Premier League and, although the stand by itself cannot guarantee future success, I have no doubt that failure to extend our capacity would eventually have consigned us to the backwaters of English football.
As part of the continued expansion of our youth development programme we have acquired from the University of East London and subsequently renovated an 18 acre sports ground at Little Heath, which is situated close to our training ground at Chadwell Heath.
In partnership with the London Borough of Newham we have commissioned 'Champions', a bronze sculpture depicting Bobby Moore, Sir Geoff Hurst, Martin Peters and Ray Wilson at the end of the 1966 World Cup Final. We have selected artist Philip Jackson, one of Britain's most accomplished sculptors, and 'Champions', which will be unveiled in June 2002, will sit on a newly landscaped site at the junction of Green Street and Barking Road.
Operating Results
Despite a 6% increase in turnover, the operating loss for the financial year increased from £0.7m to £3.3m and the pre-tax loss rose from £2.1m to £4.7m. Whilst the latter figures include £3.4m in respect of compensation for loss of office and a contribution towards the deficit of the Football League Limited Pension and Life Assurance Scheme and £5.8m relating to the demolition of the old West Stand we have to view the results as disappointing after net transfer receipts of £9.1m.
We, like all other football clubs, face a simple conundrum. The latest Deloitte & Touche Annual Review of Football Finance indicates that, although during the 1999/2000 season we had the 15th highest stadium capacity in The Premier League, we also had the 8th highest wage bill and that, during the five seasons ending in 1999/2000, our net transfer expenditure was the 10th highest in English football (just £100,000 below that of Arsenal, for example). If we add to our transfer and wage expenditure the £4m a year invested in our youth development programme, which added Rio Ferdinand, Frank Lampard Jnr, Michael Carrick and Joe Cole, all English internationals, to the squad, then 15th place in The Premier League, failure to qualify for European competitions on a regular basis and continued embarrassment at the hands of lower division teams in both English cup competitions does not make financial sense.
There is a misconception that the Club has made substantial
profits in the transfer market but the truth is very
different. During the last seven years we bought and sold a
total of 134 players (virtually the equivalent of
buying and selling a team every season). The net deficit from
this player trading activity was £34m (£5m per season)
before accounting for the receipt of the Rio Ferdinand transfer fee
- £16m after that receipt (£2.3m per season).
During the same period our annual wage bill rose from £5.5m to
£28.1m - an increase of 420% over seven years. Transfer fee
expenditure
I have set out a summary below for the benefit of both shareholders and supporters.
YearPaid £mReceived £mNet £mAnnual Wage Costs £m1994/56.4[3.0]3.45.51995/65.9[3.2]2.76.11996/715.4[7.9]7.58.31997/89.9[5.2]4.711.21998/914.4[10.6]3.817.71999/0012.6[10.5]2.125.12000/114.1[3.9]10.228.1 78.7[44.3]34.4102.0Rio Ferdinand fee [18.0][18.0] Net Exp.78.7[62.3]16.4102.0
Final placings YearLeague PositionExit Round (FA Cup)Div. of opponentsExit Round (League Cup)Div. of opponents1994/514th4thPL4th1st1995/610th4th1st3rdPL1996/714th3rd2nd4th2nd1997/88th6thPL5thPL1998/95th3rd3rd2nd2nd1999/009th3rd1st5thPL2000/0115th6thPL4th1st
Going forward the team now needs to perform in accordance with the huge financial investment we have made or the investment needs to be brought into line with what can be achieved on the pitch. Your board will do its utmost to achieve the former but much now depends upon Glenn Roeder and his football management team.
Football
Whilst we achieved results in 22 of our 38 League matches, too many drawn games (twelve) consigned us to 15th place and we only secured our Premier League status after winning the last home game of the season.
The difficulties of the first team seemed to spread to our reserve side which finished bottom of The Premier League South Section, winning just five matches.
Our youth development programme continues to thrive and our under-17 side won their FA Premier Youth Academy group for the second year running.
On a much brighter note we were delighted when two more graduates of the West Ham United Academy, Joe Cole and Michael Carrick, were awarded full England caps. Several other first team players received full international recognition. Christian Dailly, Craig Forrest, Grant McCann, Hayden Foxe, Shaka Hislop, Steve Lomas, Rigobert Song and Svetoslav Todorov were capped by their respective countries and recent signings, Don Hutchison, David James and Tomas Repka have been capped since signing for us.
Shaun Byrne, Stephen Bywater, Jermain Defoe, Michael Ferrante, and Ragnvald Soma have been capped by their respective countries at under-21 level.
Leon Britton, Niall Ritchie, Darryl McMahon and Billy McMahon were capped at under-18 level and Glen Johnson (under-16) and Liam Norval (under-14) complete an impressive array of international appearances for our players.
I would like to congratulate all these players on their achievements which provide a tremendous boost for everyone at the club.
Retail and Commercial Operations
Turnover for West Ham United Sportswear Limited declined by 7%, from £4.5m to £4.2m, in the year. Factors contributing to this decline include the loss of the stadium forecourt shop due to the redevelopment and the second year of the club's home kit cycle.
New home and away kits have been launched this summer and have been well received. The new 5,000 sq. ft. stadium store opens in December and it is hoped that this will have a beneficial impact on sales in the current year.
There was a much improved performance from West Ham United Hospitality Limited in its second year of trading. This company will expand rapidly in the forthcoming twelve months as it takes on match day catering for up to 2,000 corporate guests, non match day conference and banqueting operations and the opening in December of the group's new three star hotel to be known as 'The West Ham United Quality Hotel' and run in conjunction with Choice Hotels.
Social Responsibility
Our commitment to the community is as strong as ever and we include elsewhere in this report a detailed summary of our current community projects. I would like to thank, once again, Roger Morgan, Community Manager, Mick King, Asians in Football Manager, Jo Robson, Study Support Centre Manager and all their colleagues who have worked so hard on our behalf.
Prospects
I became Chairman of West Ham United almost a decade ago. We had just been relegated to the new First Division under somewhat traumatic circumstances. Our stadium was woeful. We needed to purchase land surrounding the ground (including a road) at a cost of nearly £2m if we were ever to redevelop our stadium in the future. The team was inadequate but we had to sell our best player to finance the forthcoming season. The pitch had no drainage, let alone under soil heating and had not been renovated since the second world war. We leased our training ground and could have been evicted at any time and our 'retail operation' was a second hand portacabin in the club car park. The famous West Ham United youth academy was to all intents and purposes in mothballs.
We have moved on.
We purchased the land we required for the redevelopment of the stadium and will shortly have one of the finest football grounds in London. We have a team valued at more than £100m, a superb pitch, two freehold training grounds, nine retail outlets and one of the best youth development programmes in the country.
I have mentioned elsewhere in my statement the need for the team to deliver on the pitch if we are to benefit from the massive investment the Club has made during the last decade both in terms of time and money. Subject to that one major caveat our future financial progress is likely to be determined by external factors which both we as a club and the football industry as a whole will need to address.
Television rights have brought massive funds into Premier League football (in excess of £240m in 1999/2000) but the growth of digital subscription television may be slowing and television viewing figures are, at best, steady. The Deloitte & Touche Annual Review of Football Finance for 1999/2000 discloses that the 20 Premier League clubs generated a total operating profit (before interest, exceptional items, player amortisation and profit or loss on sale of players) of £53m on turnover of £772m. Net spending on player transfers was a further £136m. Operating costs included total wages and salaries of £471m (up 20% from £391m the previous year) of which Deloitte & Touche estimate £319m was paid to players. We see football agents becoming profitable quoted companies, managers earning salaries that could only have been imagined five years ago and young footballers becoming millionaires before becoming first team regulars. At the same time quoted football clubs are being advised to return to private company status because of their inability to earn a sufficient return for investors - or indeed in some cases, any return at all.
Rapidly rising revenues which do not lead to rapidly rising
profits should be a warning to us all. Borrowing excessively
against future revenue streams or selling share stakes, either to
media companies or unsuspecting supporters, and ploughing those
capital receipts into revenue expenditure cannot be justified by
the pursuit of league and cup success, which can only be achieved
by four or five clubs, or even by the avoidance of the sword of
Damocles in the form of relegation. In our own case, for example,
one of last season's loan signings, who cost
£720,000 in salary and loan fee, spent 85 minutes on the
pitch. Another "free" transfer, who cost almost as
much as we earned from the whole of the East Stand for the season,
made eight starting appearances. Yet another, who will cost
the club £4.4m in salary and transfer fee during the period of
his contract, has so far made only three starting appearances in
over two years.
Such expenditure cannot be justified and we will make no apologies for approaching future transfer negotiations in a far more structured and considered way. In this context I have been greatly encouraged by Glenn Roeder's diligent approach to current negotiations. The danger in failing to control costs should be obvious to everyone. We do wish to win trophies and appear in European competitions but we will not pursue those ambitions recklessly at the expense of future generations of supporters nor, indeed, at the expense of the club itself.
The last 10 years represent an amazing journey for the club and whilst history is unlikely to repeat itself I am sure we have many more twists and turns ahead of us during the next decade. Despite the dangers I have highlighted above if we, and our colleagues in The Premier League, show the determination to retain some of the money which passes through our hands, rather than simply acting as a conduit for passing large sums of money to players and their agents, then I believe everything is now in place to ensure an exciting future for this great institution and I believe we can all look ahead with considerable optimism.
Acknowledgements
The redevelopment of our stadium and the joint commissioning of the 'Champions' sculpture has strengthened still further our links with the London Borough of Newham (voted Council of the Year 2000) and I would like to thank the councillors and officers of Newham for their continued advice and assistance.
I would, once again, like to thank Stephen and Max Griggs and their colleagues at R Griggs Group Limited, manufacturers of the world famous Dr Martens footwear, for their sponsorship and enthusiastic support. May I also take this opportunity to congratulate Max Griggs on the promotion of Rushden and Diamonds to Division 3 of the Nationwide Football League.
Our relationship with Fila (UK) Limited is also very much appreciated and valued.
I would also like to thank my fellow group directors, our management team and every one of our five hundred staff for their hard work throughout the year, especially in connection with the opening of the Dr Martens stand for the first home game against Leeds United.
Finally, may I thank all those who have supported our commercial activities, our season ticket holders and all our other supporters who have provided such magnificent backing for the team even when our results have fallen short of what we all wished to see. No football club could ask for more from its supporters.
Terence Brown
Chairman
9th October 2001