CHAIRMAN'S STATEMENT
The year saw us finish in seventh place in The FA Premier League, successfully completing our 38th season in the top flight of English football during the 44 seasons since 1958-59. As I have reported previously, only five other clubs have a better record.
Season ticket sales were up by 11.5% to a record 20,000 and virtually all our corporate facilities have been sold out.
We have successfully completed the development of the Dr Martens Stand and on 9th May 2002 Her Majesty The Queen formally opened the new stand which contains an hotel, superstore, museum, public house and educational facilities.
After two years of operating losses the group has returned to a modest operating profit and your board is determined to build upon this financial improvement in the years ahead.
Operating Results
Turnover increased by 27% to a record £48.4m and operating profit improved by £4.2m to £0.9m and your board expect this trend to continue.
Set out below, for the benefit of both shareholders and supporters, is a financial summary of the last three years' results:-
Year ended 31 May 20002001 2002 £ ,000£ ,000£ ,000 Operating profit/(loss)( 718)( 3,404)862Net interest payable( 1,060)( 1,304)( 1,807)Loss after interest£( 1,778)£( 4,708)£( 945)
A priority must now be to improve our financial results because no business can borrow money to fund losses over anything other than the shortest possible term because ultimately those borrowings have to be serviced and repaid out of trading profits.
Fortunately our task is going to be made easier by the financial reality now returning to the football industry. Boards of football clubs tread a difficult tightrope between supporters' demands for success on the pitch and financial probity.
A difficult dilemma but one that is made easier, in our case, by the club's close proximity to the City of London and the Canary Wharf complex, where many of our supporters are engaged in the financial services industry and appreciate the economic facts of life. Whilst we do have many loyal supporters who genuinely struggle to come to terms with the new financial reality and tend to see a reluctance to spend and borrow recklessly as evidence of a lack of ambition, others are able to provide a more balanced view to the collective thinking which surrounds and influences our club.
I do hope that, in due course, all our supporters will understand the need for the "belt tightening" which is taking place and realise that a priority for your board remains that of passing the club onto the next generation of stakeholders (supporters, staff and shareholders) in the best possible shape. What we cannot do is to gamble with 107 years of hard earned history in the vain hope of achieving some unprecedented success on the pitch. I also need to remind everyone associated with the club that we now have a new group of stakeholders, namely the institutions who have advanced £33m of loans to enable us to develop and fit out the new Dr Martens Stand and our training grounds and to refinance certain short-term loans and who have every right to expect us to comply with our obligations under our loan agreements.
To assist the understanding of both shareholders and supporters I have, once again, set out below details of our transfer activity and football achievements since the 1994/5 season:-
Football
Glenn Roeder was appointed manager on 13th June 2001 and in his first season achieved results in 23 of our 38 League matches and, with fewer drawn games than in the past, the team finished in a highly creditable seventh place in The FA Barclaycard Premiership. This was the club's sixth highest finish and its fourth top ten finish in five seasons, a feat which equalled the record set between 1981 and 1986. To put this achievement into perspective I would remind shareholders that during Bobby Moore's sixteen seasons with the club we finished in the top half of the old First Division on just five occasions and never in consecutive seasons. Our average League finishing position during the remaining eleven seasons was fifteenth.
Our home record was one of the best in the Premiership, with only three defeats, and the thirteen goals conceded at the Boleyn Ground was second best to Liverpool's eleven. The 35,546 gate for the last Premiership game of the 2001-02 season was an all-seated record for the Boleyn Ground.
The club's Under-19s finished second in their FA Premier Youth Academy League and the Under-17s reached the play-offs stage in their League.
Three players - David James, Joe Cole and Trevor Sinclair - were selected for England's World Cup squad that competed in the finals tournament in Japan and South Korea. This was the first time since 1966, when England won the World Cup, that three West Ham United players were named in the England squad for a major tournament.
Three players - Jermain Defoe, Stephen Bywater and Michael Carrick - were regularly selected for England Under-21s squad and Glen Johnson regularly captained the England Under-18s.
Steve Lomas and Grant McCann won Northern Ireland caps, whilst Christian Dailly featured regularly for Scotland and Don Hutchison was also a first choice for Scotland before his injury in February 2002. Other internationals included Tomas Repka (Czech Republic), Vladimir Labant (Slovakia), Shaka Hislop (Trinidad & Tobago), Svetoslav Todorov (Bulgaria), Rigobert Song (Cameroon), Titi Camara (Guinea), Shaun Byrne (Republic of Ireland Under-21s) and Richard Garcia (Australia Under-21s).
I would like to take this opportunity to congratulate all these players on their achievements.
Finally, may I draw shareholders' attention to the changing circumstances that now apply to player contracts. We, along with all other clubs, must ensure that the new freedom of contract enjoyed by players does not allow our best players to simply leave at the end of their contracts with no compensation payable to the club that either discovered and nurtured their talent at a huge financial cost or, indeed, paid a substantial transfer fee to secure the services of the player in the first place.
The balance between ensuring we do not extend contracts at unrealistic salaries and trying to retain the best players is one that every club will face and will inevitably lead to hard decisions having to be taken with players who refuse to commit themselves to the club. There has been some high profile examples of clubs having to replace, at great expense, players who allow their contracts to expire and leave with no transfer fee being payable and these are lessons all clubs must heed.
Retail and Commercial Operations
West Ham United Sportswear Limited did extremely well to maintain its turnover and profit levels without a retail outlet at the stadium due to the redevelopment, during a difficult time for the sports goods industry with tough trading conditions and heavy discounting. The new stadium superstore will enable the company to rationalise its retail portfolio and your board will be giving serious consideration to such rationalisation during the current financial year.
West Ham United Hospitality Limited operates the catering facilities and the Quality Hotel at the stadium. On a matchday we serve 2,000 three-course meals and provide kiosk facilities for over 30,000 supporters. After a match our 70 executive boxes are transformed into 3-star hotel bedrooms and our matchday banqueting facilities turn into rooms for private and corporate functions. The company received an 'Investors in People' accreditation in 1999 and is currently working towards 'Hospitality Assured' accreditation.
Social Responsibility
West Ham United continues to operate to the highest values of corporate social responsibility and a detailed summary of our current community projects is included elsewhere in this report.
Prospects
The club has made enormous strides during the last twelve months and successfully completed the redevelopment of the Dr Martens Stand. The hotel, museum, superstore and conference facilities are trading in accordance with our expectations and have been well received by our own supporters and the general public.
With record season ticket sales and 'sold out' corporate facilities the redevelopment is rightly seen as an unqualified success and one that fully justifies the massive financial commitment the company has made.
On the pitch we have an excellent squad of well managed players who are more than capable of bringing success to the club. With still more excellent young players waiting to emerge from our Academy the future does indeed look very bright.
Acknowledgements
I would like to take this opportunity to thank everyone at the club for their hard work and dedication throughout the year, all those who have supported our commercial activities, Fila (UK), our merchandise suppliers and R Griggs Group Limited, manufacturers of Dr Martens footwear, our shirt sponsors. I would also like to thank the councillors and officers of the London Borough of Newham for their continued advice and assistance.
Our club and its supporters are bound together by 107 years of history, family tradition and loyalty - a combination that has enabled us to remain one of the country's best supported football clubs and I would like to thank every one of those supporters for their magnificent backing, which has made possible all our recent progress.
Terence Brown
Chairman
November 2002