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
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
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).
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
