Chief executive's report to Watford's annual accounts 2007/08 (From Watford Observer)

Chief executive's report to Watford's annual accounts 2007/08

4:02pm Tuesday 18th November 2008 in

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Overview of the Season

The 2007/08 season was an exciting one for the Club as the football team competed once again in the Championship. Operationally we focused on completing the investment projects initiated during our year in the Premiership.

Prior to the start of the 07/08 season, we completed the improvements to the concourse and facilities, including opening the new V-Bar, in the Rookery Stand. In addition we refurbished the Executive Boxes in the Rous Stand as well as the other corporate hospitality lounges. In September 2007 we entered into a long lease with St. Pancras & Humanist Housing Association for the space behind the Rookery Stand and south and north-west corners. The housing association is responsible for building and operating 164 key worker housing units which will provide much needed accommodation for nursing and other staff at the Watford General Hospital. The construction work is complicated by the fact that the stadium has to be fully operational on matchdays and we are indebted to the contractors, Kier, for working within these constraints and minimising the impact to the normal running of the stadium. As part of the project plan, the housing association undertook to build the foundation to the new southwest corner which will in time house the changing rooms, matchday control suite and other matchday facilities. We expect the contractors to hand over the south-west “shell and core” by the end of January 2009.

One of the knock-on effects of the housing project is that we had temporarily to relocate the Club’s administrative offices. We moved into new premises in Tolpits Lane in July 2007 on a short term lease. Whilst the new office has added to our administration costs, it has enabled us to bring together under one roof most of the Club’s operational departments including not only commercial staff but also the Trust, football recruitment and Academy.

As the Chairman has explained in his statement, we face a significant challenge in managing down the Club’s cost base should we not get promoted this season as the parachute payments come to an end in June 2009. Whilst a new and improved TV deal has been agreed by the Football League, there is a big difference in the allocation of TV revenues to a Championship versus a Premiership club. The ever increasing player wage inflation, fuelled by the fantastic sums being paid to top Premiership players, makes the challenge of “balancing the books” in a Championship club that much more difficult. We realise that some of these things we have to do will meet with some criticism. However there are some decisions we just have to make in order to protect the Club going forward. On the plus side we are continuing to invest in our Academy and youth development. The Club prides itself on the number of its professional players who have come through the Club’s Academy. We not only have the home grown established first team players such as Tommy Smith, Richard Lee, Adrian Mariappa, John-Joe O’Toole and Lloyd Doyley but we look forward to the future with optimism with Academy players coming through such as Jordan Parkes, Theo Robinson, Liam Henderson, Lewis Young, Billy Gibson, Ross Jenkins and Dale Bennett.

Financial Review

Revenue for the year ended 30 June 2008 was £22.4 million (2007: £29.9 million) - a decrease of £7.5 million. This is due primarily to the drop in league funding following relegation from the Premier League. In addition the average match attendance was 16,870 against 18,882 last season in the Premiership. The drop in average attendances flows through into lower ticket sales and to a lesser extent lower matchday catering income (albeit the home supporters spent more per head in the kiosks on matchdays). Cost of sales (excluding amortisation of player registrations) increased year on year by £1.4 million which is driven primarily by higher costs of running the football team and Academy. The amortisation and impairment charge on capitalised players’ registrations increased by £3.0 million to £5.8 million reflecting the new squad members brought on board in 2007. Administrative expenses decreased by £0.6 million to £6.2 million. The profit on disposal of players’ registrations of £7.4 million is comprised primarily of the sale of Hameur Bouazza’s registration to Fulham FC in August 2007 and Marlon King’s registration to Wigan Athletic in January 2008 together with appearance and sell-on payments for players transferred in previous seasons. The exceptional income of £4.6m relates to the lease premium received in connection with the 125 year lease granted by the Club to the St. Pancras & Humanist Housing Association for the key worker housing units at the rear of the Rookery Stand. Given the length of the lease, the transaction is being treated as an outright disposal and recognised in full in the Income Statement in the year of receipt.

Community

During the 2007/08 season the Club was named as the Football League Community Club of the Year. This award is real recognition for Watford Football Club and its community partners and builds significantly on the Club’s family and community traditions. For many years the Club has taken a leading role in the local community and has taken its Corporate Social Responsibility (“CSR”) agenda very seriously. However, over the last two years the Club has taken a strategic decision to place community at the heart of the business and central to the Club’s longer term vision to be a true community partner.

The WFC Community Sports & Education Trust (“the Trust”) now has a team of over 20 full time members of staff and a 50 plus strong coaching team that is active across West Hertfordshire, Harrow and Hillingdon. The Trust has developed a wide range of projects utilising sport and Watford Football Club as a vehicle for engagement in education, health and social inclusion initiatives reaching over 100,000 participants per annum. The Trust works with a wide range of partners from the private, public and voluntary sectors, with partnership development being vital to its recent progress, expansion and national recognition at the Football League Awards. The Club supports the Trust in its efforts to represent the Club in local communities, making a positive difference to the lives of children and young people. The Club and the Trust together can be proud of our community work and we look forward to further enhancing our growing reputation in the coming years.

On behalf of the Board of Directors I would like to place on record our gratitude and congratulations to Julian Winter, Rob Smith and their staff on the award and the progress made in the last year.

Outlook

With our parachute payments coming to an end in June 2009, we have to walk a tightrope of balancing the ever increasing demands of fielding a competitive Championship football team with financial reality. I am confident that we will navigate through this difficult period and become stronger as we focus in on the Club’s traditional strengths of loyalty, family and community.

Mark Ashton

Chief Executive