Walsall 2018: Heading Out on the Highway

Introduction

Walsall have just published their financial results, the first for a League One club for 2017/18, and, just as they have done for the previous five years, they’ve made a profit and kept their status in that division for the eleventh consecutive year.

That seems to be enough to satisfy the ambitions of the club owner, Jeff Bonser, though some fans seem to be fed up with his control of the club, and the way he extracts money from it through owning the stadium.

Financial summary

Income: £5,853,000 (down 12%)

Wages: £3,376,000 million (down 0.3%)

Sustainable operating profit £63,000 (down 89%)

Wages to income 58% (up from 51%)

Player sales £110,000 (purchases of £179,000 in 2016/17)

Borrowings £2,038,000 (down £289,000)

Income

Not breaking the law

Most clubs show three types of income in their accounts, but somewhat frustratingly Walsall only show two, by combining broadcasting and commercial streams.

Matchday income was almost identical to 2016/17 at just under £1.1 million. Average attendances fell by 6.2% and early exits from the cup competitions didn’t help either. The importaince of a good cup run or a draw against a ‘big’ team was highlighted in 2015 and 2016 when the Saddlers made it to the FL Trophy final at Wembley and had a cup draw against Chelsea respectively.

This works out at £229 per fan for the season, a 7,5% increase on the previous season, but probably due to having an extra home cup game compared to 2016/17. If fans think this is far lower than the price they pay for their season ticket, note that the club figures exclude VAT at 20% and are an average of adult and concession prices.

‘Other’ income fell by nearly £800,000 to £4.76 million. The main components of ‘other’ income are broadcasting (estimated at £1.5 million) and commercial sponsors, catering conferencing and so on. The importance of this income source, which can generate cash far more often than the 23-28 home match days each season is highlighted as it brought in more than half of the Saddler’s revenue in 2017/18.

Compared to the income of L1 clubs the previous season, Walsall in 2017/18 were about mid-table in terms of the total generated (Bolton’s figures were distorted as they were in receipt of parachute payments from the Premier League).

Costs

Footballs main costs are in relation to players, and here Walsall continue to keep tight control.

The total wage bill, including pensions and national insurance costs, was 0.3% lower than the previous season, despite the club employing eight more staff., The reason for the slight fall is likely to be linked to a 19th place finish in League One, compared to 14th the previous season, and so player win bonuses would be lower.

The club clearly have a tight wage budget set each year, but the wage to income ratio increased from 53% to 58%, meaning that the club was paying out £58 in wages for every £100 of income that was generated in 2017/18. This compares to an average of 100% for clubs in the Championship.

The increase in staff numbers meant that the average annual salary of someone at Walsall fell by 6% to £24,824. Players and management are clearly likely to be on higher than this average figure, and we estimate they earned about £90,000 (£1,730 per week) which puts the club at the lower end of the division of those clubs who report wage totals (many clubs hide behind a legal loophole and don’t show this figure), and may explain why they have infrequently challenged for promotion to the Championship in recent years.

Director pay at Walsall fell by 9% but was still £175,000

One figure that irks some Walsall fans is the rent paid by the club, as it does not own the Bescot Stadium. For the last couple of seasons Walsall have paid £449,000 a year to Suffolk Life, owner Jeff Bonser for rent for the stadium, training facilities and car park. Whilst the rent was frozen compared to 2017, it had risen significantly in prior years.

It does seem that whilst Walsall are one of the lowest wage payers in the division, they are one of the most generous tenants to their landlord.

Profits

My Oh My

Profits are income less costs. Walsall seem to be able to break even each year, just. This could be manipulated by the directors’ tweaking their pay to ensure the club finishes in the black each season.

There are different profits that can be used when analysing a business, Operating profit is before taking into account interest costs on loans.

Walsall’s operating profit fell by 78% in 2018, mainly due to the decline in income in the year, but the club made a profit, which is not the case for many of its fellow League One clubs.

EBIT (Earnings Before Income & Tax) is the same as operating profit but strips out non-recurring items such as gains on player sales, legal cases writedowns and redundancies.

Walsall’s EBIT was £63,000 in 2018, whereas every other League One club that published an profit and loss account made a loss in 2017, and there is little reason to suspect this will have changed in 2018.

Walsall paid £50,000 in interest costs in 2018, of which £23,000 was on loans from directors. This means that directors made a total of £656,000 from the club in 2017/18 (Rent £459,000, pay £175,000 and interest £22,000).

One of us is in the money.

Player trading

You don’t see Walsall mentioned too often in the transfer gossip columns of the papers or sports broadcasters, and there’s a good reason for that.

In the four years leading up to 2016/17 the club neither sold nor bought a player for a fee. This record was broken when Cypriot striker Andreas Makris was signed for £179,000 (€200,000). Makris’s season proved to one of disappointment, with one goal in 32 games.

After proving to be shite a disappointment Makris’s value was written down in the accounts, and he was sold back to Cyprus in the summer of 2017 and this has shown up in the 2018 accounts as a fee of £110,000.

Walsall did not sign any players for a fee in 2017/18, but they are not alone in League One in relying on Bosman signings and loans.

Debts

The sale of Makris allowed Walsall to repay some of their outstanding loans. In total the club had borrowings of just over £2 million at 30 June 2018, a reduction of £289,000 compared to the previous year. Included within these borrowings is £1,339,000 due to directors and £399,000 to the bank, which is guaranteed by Jeff Bonser.

Conclusion

Walsall, almost uniquely for a League One club, have shown that they can break even season after season by managing their wage budget carefully, and being ultra-cautious in the transfer market.

Promotion to the Championship is worth about an extra £7 million a season in TV money, plus bigger gates against local rivals such as Villa, West Brom and Birmingham City. With the club so close to the playoffs at present going up could be an income windfall.

The danger with promotion is that wage bills also tend to balloon (the average is £22 million per season) and for clubs with resources such as Walsall the stay in the Championship is often brief (Burton, Barnsley and Rotherham can testify to that).

Whilst owner Jeff Bosner has been generous in lending money and guaranteeing the bank loans and overdraft, he is also the biggest beneficiary of the club financially in terms of the varying income sources from Walsall.

From an analysts’ perspective, we do however commend Walsall for producing their results so quickly after the end of the season and not taking advantage of legal loopholes to restrict the amount of information they publish.

The Numbers

 

Walsall: Mama Weer All Crazee Now

Football, it’s all about money, footballers are a bunch of greedy tossers, all clubs lose a fortune and are bankrolled by overseas millionaires, the game is going to destroy itself etc.

But here’s a different club. It lives within its means, makes a profit every year, and that’s without selling a single player for a fee, and has 128 staff who between them earn just over half of what Manchester United pay Jesse Lingard.  Perhaps it could make you fall in love with the game again?

The club is Walsall, in the Black Country, nice little stadium, shame about the lack of decent pubs nearby, but other than that the epitome of a stable lower league outfit who have spent the last ten years in League One. (I now await revelations from angry Saddlers fans who spill the dirt on their club).

As a Brighton fan, I have mixed reactions about Walsall, watching my team lose 2-1 in an insipid Capital One Cup game at the start of 2015/16 season. and seeing the mighty Chris O’Grady’s last kick for the club as he put a penalty for the Albion into Row Z before being immediately substituted and running off the pitch faster than he’d moved during the match.

Income

Most clubs show three types of income in their accounts, but somewhat frustratingly Walsall only show two, by combining broadcasting and commercial streams.

Walsall’s income was almost unchanged at £6.6 million in 2016/17, although a £493,000 increase in commercial/broadcast offset a £425,000 (28%) fall in matchday income. The latter was partially due to a playoff finish and reasonable runs in cup competitions benefitted the club in 2015/16 when they played Chelsea in the League Cup and made it to the fourth round of the FA Cup.

A new BT/Sky TV deal for the Premier League resulted in an increase in solidarity payments that trickle down to League One clubs from £360,000 to £645,000.

Over the last five years Walsall’s income has been growing steadily, mainly due to non-matchday sources.

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Costs

Footballs main costs are in relation to players, and here Walsall seem to have a lid on their ambitions.

The total wage bill for 2016/17 was £3.12 million, or just over £60,000 a week, before adding in pension and national insurance costs. This works out as an average of £470 a week for the staff. Even so this represents a 36% increase in the wages paid in 2012/13 of £2.29 million, where the average Walsall employee was on £390 a week.

The club clearly have a tight wage budget set each year, and this is why the wage to income ratio fluctuates in a narrow range around 50%. This compares to an average of 101% for clubs in the Championship.

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The employees who have perhaps done most well from the club are the directors, whose pay has increased from £106,000 to £192,000 over the five years of our analysis.

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The club appears to rent its stadium and training ground. The rent fluctuates from year to year, and went up from £400k to £449k in 2017. This appears somewhat strange, as the club appears to both own and rent the Bescot.

Talking to some fans on Twitter, it appears that the club owns the stadium, but the land it occupies is rented. Apparently the land is owned by Chairman Jeff Bonser’s pension fund.

This has been investigated by the excellent David Conn in The Grauniad.

https://www.theguardian.com/football/david-conn-inside-sport-blog/2011/mar/30/walsall-stadium-sale

The club is therefore committed to paying about another £5m in rent for land at the stadium until the next review.

It therefore appears that the board are generating money from the club directly and indirectly in three areas, fees (£192k), rent (£440k) and interest on loans (not too clear but at least £6k).

This doesn’t mean that Posner and his colleagues are in the Monty Burns category of evil company owners, but neither are the likely to be nudging the likes of local philanthropists at other clubs such as Steve Gibson (Boro), Peter Coates (Stoke) and Tony Bloom (Brighton) off their crowns either.

Profits

Profits are income less costs. Walsall seem to be able to break even each year, just. This could be manipulated by the directors’ tweaking their pay to ensure the club finishes in the black each season.

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Player trading

You don’t see Walsall mentioned too often in the transfer gossip columns of the papers or sports broadcasters, and there’s a good reason for that.

It initially appears that during  the four years leading up to 2016/17 the club neither sold nor bought a player for a fee.

This record was broken during the last season, when Cypriot striker Andreas Makris was signed for a supposed record fee of £270,000 (€300,000). This was funded by Walsall’s success the previous season.

This fee is at odds with the accounts though, which reveal that the actual amount paid was £179,000 (€200,000). Makris’s season proved to one of disappointment, with one goal in 32 games. After proving to be shite a disappointment Makris’s value was written down in the accounts, and he was sold back to Cyprus in the summer of 2017. Whilst the fee wasn’t disclosed, it looks, from a bit of number triangulation, the fee was about £110,000.

In relation to the sale of players, the issue is muddied by the way the club appears to have dealt with the issue. Normally, when a club makes a disposal, it is shown separately on the profit and loss account, as the club is not in the actual business of selling players.

Sheffield United do this in their accounts, as do practically all others.

What Walsall appear to have done is fold in the profit on player sales within their ‘football and commercial income’ heading. That’s at best reducing transparency, we think it’s a shabby way to deal with the subject, and inconsistent with what we believe is best business practice.

Conclusion

Walsall have shown that a club can break even, by managing their wage budget carefully, and being cautious in the transfer market (ten clubs in League One did not sign players for fees in 2015/16 for example).

Had they been promoted to the Championship in 2015/16 after finishing third and making the playoffs, they would have had a season in the sun, playing the likes of local rivals Villa, Birmingham and Wolves. Having done so once, and seen the likes of Shrewsbury have a good season to date in League One, it’s difficult to see the Saddlers change their business model for the foreseeable future.

The club does have debts of around £2 million from the directors, but these are serviceable. Part of these loans are interest free.

From an analysts’ perspective, it’s also a breath of fresh air to see a club being so transparent and putting out its full results in the public domain for fans to see. Clubs are a part of the community, and the community have a moral right to know about how the club is financed.

However what should be three cheers is reduced to two.

The methods used to extract money from the club by some who are responsible for its long term welfare, and the way that some figures (such as player disposals) are not disclosed.

This is harsh on those who travel the length and breadth of the country watching the team play every week.

Fans invest more than money into their clubs, and have a degree of moral and emotional right to know the extent to which the club has benefited from player trading.

The Numbers

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