Ill-judged signings crippled Hammers
WEST HAM S decision to give Dean Ashton a new five-year contract in December 2008 cost them a staggering �5.8 million, the latest set of accounts have revealed, writes DAVE EVANS. Ashton announced his retirement from the game just 12 months after signing
WEST HAM'S decision to give Dean Ashton a new five-year contract in December 2008 cost them a staggering �5.8 million, the latest set of accounts have revealed, writes DAVE EVANS.
Ashton announced his retirement from the game just 12 months after signing the deal, and unless the club can recoup some of that cash by pursuing their legal case against the Football Associa-tion, then they will be left disastrously out of pocket.
The financial report for 2008-09 was expected to make horrific reading and it did not disappoint.
The club made a loss of �16.2million.Turnover was down to �76.1million, due mainly to the collapse of sponsors XL Holidays which cost them �4m, while the outsourcing of the catering and hospitality operations to Compass came at a cost of �4.2m.
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Wages have been cut by �3.3million, but still represent a huge proportion of 78 per cent of their turnover, while bank debt increased to �44.9million, despite the club's efforts to slash costs.
But it is some of the waste on players that is highlighted most in the report.
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Hammers' finance director Nick Igoe made it plain where he thought the real problems lay.
"Two players signed in the January 2007 transfer window have started a combined total of 15 games in three years and cost the group �12million," said Igoe in his report.
"A further two players signed in the summer of 2007, one of whom has since left the club, have started a combined total of 32 games and will have cost the group �34million over the term of their contracts."
Igoe is referring to West Ham flops Nigel Quashie and Calum Davenport along with Kieron Dyer and Freddie Ljungberg.
West Ham's wage bill was the sixth highest in the Premier League and Igoe stressed that their progress did not justify that.
"It has to be concluded that many of the group's investment decisions in the last two to three seasons have been ill-judged," he said. "The investment in the playing squad has not generated an appropriate return, either financially or in terms of performance.
"In 2007-08 the wage costs were the sixth highest in the Premier League and the situation in 2008-09 is likely to be similar.
"It follows that a ninth and 10th finish, one Carling Cup last eight and one FA Cup last 16, represent an unsatisfactory return on this expenditure."
There are also underlying problems that West Ham still need to deal with.
Loans obtained from five different banks now amount to �31.5m worth of debt, something that cost them nearly �4m in interest over the financial year.
West Ham will have to pay back �3.5million of that debt within one year, the same amount the following year and the whole amount within five years.
Despite all the doom and gloom however, Igoe is more positive about the future of the club, especially since the takeover of David Sullivan and David Gold.
"In overall terms, for a company generating �75-80m of annual turnover, bank debt of �40-45m can hardly be considered excessive," said Igoe.
"The reason why the level of debt is challenging is that it is relatively short term in nature, expiring as it does in August 2011.
"The cost-saving initiatives implemented by the board, principally in respect of players' wages, will be evident in the 2009-10 accounts and forecasts indicate that the group is capable of returning to a position of generating operating profits in forthcoming periods."
We shall see.