Accounts released last week show Watford are making great strides to reduce levels of debt, but also that a third season in the Championship means having to cut their cloth accordingly and a period of austerity.

The Hornets made a pre-tax profit of £12.8m, but would have made a loss without £29m in player sales – and the club had just £3,000 in the bank at the end of the financial year.

The overall revenue dropped from £66.2m last year to £57.6m this time around, but that was offset by reducing operating costs from £94m to £69m – that came as a result of a raft of different savings though lowering the wage bill played a big part.

Watford’s wages went down from £48.7m to £33.0m, the club’s lowest since 2014/15.

The Hornets’ £12.8m pre-tax profit is comfortably the highest figure seen by those Championship clubs that have published 2023/24 accounts to date.

All of the other seven clubs have posted losses, ranging from Plymouth Argyle’s £2.4m to Hull City’s £18.8m.

However, without the £29m realised from selling players (a number which was down from £59m 12 months earlier) then they would have been posting an operating loss of £11m.

The Hornets' successful player trading business model is underscored by the fact that they have made a massive £200m profit in this area in the last six years.

Of course, as every Joao Pedro, Ismaila Sarr and Yaser Asprilla leaves the building, another must be coming in through the entrance door in order for the model to continue to sustain those levels.

That’s why it feels increasingly likely that players such as Giorgi Chakvetadze and Kwadwo Baah – both given new contracts this season – will be cashed in before too long.

Income from broadcasting fell from £48.3m to £45.0, as the parachute payments are lower in the second year after relegation from the Premier League.

It’s worth remembering that the parachute money has now ended, leaving the club with just £9m of broadcasting income, the effects of which will be seen in the accounts published next year.

The largest drop in income, though, was the £6.2m of commercial revenue, which had been £10.3m a year earlier.

The Watford Observer has asked the club to give some detail as to what areas fall under ‘commercial’ and why that figure has plummeted, and has not received any response as yet.

In the last financial year, Watford also paid £1.1m in termination payments, presumably the cost of removing Valerian Ismael and his staff.

That figure is significantly down from the £7.8m paid in 2021/22 when Xisco Munoz, Claudio Ranieri and Roy Hodgson were all fired.

In all, it means Watford have coughed up nearly £20m in settlement payments over the last five seasons.

Watford’s £58m revenue last season is some £90m lower than the heydays of life in the Premier League during the 2018/19 season, when the Hornets finished 11th in the top flight and reached the FA Cup Final.

Because of the aforementioned wage reductions, Watford now have a relatively healthy wages-to-turnover percentage of 57%.

Nonetheless, that percentage will not last due to the revenue reductions described above.

However lower wages and a relatively small summer expenditure on new signings of around £2.7m only serves to suggest the squad is weaker than it was.

In the summer, the likes of Leeds United and Hull City both spent in excess of £25m, around 10 times more than Watford.

Nonetheless, nearly every other club in the Championship increased season ticket prices for this season, whereas Watford froze theirs having cut them by about 7% a year before.

We all want a great team and new signings, but by freezing season ticket prices the club chose not to pass the cost of player acquisitions onto supporters.

Watford reduced their total debt from £115m to £72m primarily by inward transfer instalments being allowed to clear debt with Macquarie Bank.

The £72m is mostly made up by additional Macquarie debts which clear this year and £51.7m owed to the owner, Gino Pozzo.

However, even loans from your owner come at a price, and there is interest accruing.

The notes in the accounts explaining the group loans say, in total, that £5.8m interest has been charged to the profit and loss account but not paid, however the balance of the loans in question has not moved.

The Watford Observer has asked the club where the liability to pay the additional £5.8m interest is shown in the accounts, and has not received any details as yet.

There was also the matter of a loan that showed in the last set of accounts 12 months ago of £319,000 made to the club by its own Community Sports and Education Trust.

A year ago it was stated that £150,000 of this was due to be paid in the coming year, but this has not happened since the new accounts show that loan amount remains at £319,000.

The Watford Observer has asked the club why that £150,000 repayment was not made, and if any funds have been repaid to the Trust during the current financial year, and has not received any response as yet.

One thing about large business accounts is that they usually contain figures we cannot personally reconcile with our banking matters – but the £3,000 left in Watford’s cash balance on the final day of the accounting year is heading towards sums that even the layman can see is incredibly low.

It’s no surprise that Isamel Kone was sold to Marseille very quickly after the end of the season, and his fee would have contributed to the player sales figure which covered the overall losses of the last financial year and enabled the club to record a profit.

Whereas the last two sets of accounts have been heavily bolstered by the sale of playing talent at high fees, the current squad has more limited financial value.

Add to this the loss of parachute payments and the next set of accounts are almost certainly expected to have more red ink than this year.

In the meantime, the minimal squad strengthening so far this January becomes more understandable, if no less worry and disappointing.