Owner Gino Pozzo was not repaid any of the money he has loaned to Watford, despite many people interpreting the latest sets of club accounts as him having received £25m back from the club last year.

The accounts for the year ending June 30, 2022, were released late last week, and showed that 'group/director loans’ had gone down by £25m.

A reasonably-made assumption was that Pozzo’s loans to the club had been reduced by that exact amount.

However, when the Watford Observer asked the club for clarity on the matter this week, it was explained that the club’s parent company, Hornets Investment Ltd, had repaid a £25m loan to specialist sports sector lender 23 Capital.

This loan was classified as ‘group/director loans’ in the accounts of the club, but reading the parent company accounts in conjunction reveals the true position.

By paying off that £25m debt and extending their facility with Macquarie Bank, Watford have actually saved money as the interest rate chargeable has been reduced.

When I spoke to club chairman Scott Duxbury in June 2022, he said of the debts outstanding to the owner: “Is he ever going to call those loans in on himself? Never. If at some point in the future the club is sold, then that debt is paid back as part of the purchase price.”

While an initial glance at the accounts suggested otherwise, it’s clear that the owner has been good to his word, and he has maintained his loans of £47m in the club.

The increased borrowing from Macquarie is reflected in an increase in other loans to £77m.

What the accounts do show is that Watford were £124m in debt at the end of the accounting period (June 30, 2022). When the Pozzo family took ownership in 2012, Watford were roughly in debt to the tune of £10m.

One debt that has now been cleared is a bank overdraft that peaked at just over £15m in the 2019/20 accounts, had reduced to less than £500,000 20/21 and is now zero in the latest accounts.

With another season in the Championship looking increasingly likely, it would suggest that the club will need to realise what it can from its saleable assets (ie Ismaila Sarr, Joao Pedro etc) this summer in order to address some of that debt.

There is still another year of parachute payments as well, but notwithstanding that it’s seemingly inevitable that the club will need to look at where money can be saved.

One alarming fact the accounts showed is that every penny Watford made from matchday revenue during the 2021/22 Premier League campaign last season was spent on termination payments to former head coaches and their staff.

The Hornets earned £6.76m in matchday revenue during the 2021/22 season in the Premier League, but shelled out £7.81m in termination payments, presumably to the likes of Xisco Munoz, Claudio Ranieri and their staff.

And, despite these accounts covering a season that the club was in the Premier League, it shows they made a loss in excess of £18m – which begs the question if you make a loss when you’re dining at the top table, when won’t you make a loss?

Encouragingly, the wage bill for last season was lower than the last time the club were in the Premier League, and they spent only £24m on players – around a third of what they shelled out in 2020.

Unsurprisingly, total revenue rose from £57.1m to £128.1m thanks to being in the top-flight with commercial revenue reaching £36m, nearly double that achieved in both 2019/20 and 2020/21, presumably explained mostly by shirt sponsorship deals.

It’s my understanding that player salaries fell last season, although there is no individual line for this in the accounts as only ‘wages’ are shown. If, as expected, some of the playing assets are sold this summer then total player salaries could dip below £20m next season.

Other operating expenses increased 60% from £27.7m to £44.2m, a trendline in the wrong direction with it being, as a percentage of revenue, 10% higher than the first season in the Premier League under the Pozzo ownership.

What could these other operating expenses be, and why have they risen? Firstly, a part of the figure will be the cost of operating on matchdays and given the previous season the stadium wasn’t open due to Covid, those costs were bound to rise.

Then there are the costs of making any changes to the stadium and its facilities (ie floodlights, safety, broadcast areas) required following promotion back to the Premier League.

Nonetheless, even allowing for matchday costs and Premier League costs, the question as to what exactly led to a £16.5m increase in the all-encompassing ‘other operating costs’ will doubtless be high on the list when fans get the chance to talk to Pozzo and Duxbury later in the year.

The total debt trend since Watford first achieved promotion to the Premier League under Pozzo ownership in 2015/16 has risen from 52% of revenue to 97% of revenue.

With the club now staring down the barrel of another season of Championship football, this level of debt roughly equates to about two years’ worth of revenue in the Championship.

It’s hard to imagine how that would be sustainable without some sort of significant investment, and that may tally with rumours of outside interest being considered in return for a stake in the club.

During the last fiscal year, the £965,000 loan taken from a director during the Covid season (2019/20) was repaid. Watford FC only has three directors: chairman/CEO Scott Duxbury, and non-execs David Fransen and Stuart Timperley. The accounts do not show who made the loan or what it was required for.

Contacts with far greater understanding of football finances have told me that a net liabilities position means that the club is technically insolvent, and that in such circumstances the club can only continue to avoid going down a formal insolvency process if the cash-flow forecasts show that the club can continue to meet its liabilities as and when they become due.

The fact these accounts have been signed off by the auditors suggests Watford have been able to show it can continue to meet future liabilities and operate, a significant part of this being the owner’s commitment to continue to financially support the business for at least a 12-month period.

Of course, these recently-released accounts only cover the period to June 30, 2022, and whilst Companies House records show that further fund raising has been made via Macquarie Bank, and is secured against parachute payments, the change to the debt position since these accounts is unknown.

What we do know is the club has also removed two more head coaches and their staff and looks set to spend a second successive season in the Championship for the first time since 2015.