An increase in salaries and a decrease in profit on player sales were among the key reasons why Watford made a significant pre-tax loss for their last financial year.

The Football Club’s annual report and financial statements have been published and they show the Hornets made a pre-tax loss of £31.6 million for the year ending June 30, 2018, compared to a profit of £4m for the previous corresponding 12-month period.

Crucially though, the period covered ends before Richarlison made his club record transfer to Everton last summer.

Watford’s turnover for the year ending June 30, 2018 was £128.2m, a rise of just over £4m on the previous 12 months. This was primarily due to an increase in media and broadcast revenue and a growth in income from FX Pro, the club’s main sponsor.

A total of £108.8m was received from media and broadcasting – 85 per cent of the club’s total turnover in their last financial year – again underlining the importance of retaining Premier League status.

Chairman and chief executive Scott Duxbury’s financial review also explains that Watford’s salary costs rose from just over £76m to £85.8m, with a growth in players’ salaries responsible for £7.7m of this increase.

While other operating expenses only went up by a relatively small amount, the amortisation of player registrations – the cost of a player over the length of their contract – increased from £28.5m to £41.4m.

These costs meant Watford made an operating loss of £29.3m compared to £14.8m for the previous 12 months.

Operating losses do not include the profit on the disposal of player registrations and the departures of Valon Behrami, Steven Berghuis, Mario Suarez and Uche Agbo were principally responsible for a gain of £2.9m. However, this is almost £20m less than the £22.3m profit made for the 12 months ending June 30, 2017.

The picture next year is set to look significantly more favourable though, because the notes to the accounts explain that since June 30, 2018 an estimated net income of £46.5m has resulted from the sale or termination of player registrations, including Richarlison’s move to Goodison Park.

Conversely, and dependent upon exchange rates at the time of payment, Watford are committed to an estimated £7.7m as a result of player signings, with another £4.3m potentially payable in additional clauses.

Player acquisitions have also seen intangible assets – the value of the squad – increase by £32m from £91.8m to £123.5m as of June 30, 2018.

Duxbury stated: “As in previous years, the financial performance of the club is reflective of its progression in the Premier League – turnover continues to grow steadily, as do the running costs associated with running a successful business within the Premier League.

“Retention of the Premier League status for the 18/19 season maintains the club’s positive outlook. The shareholders are committed to invest in the club to enhance its value and performance on and off the pitch, and will keep investing in upgrades for both the stadium and the training ground, along with strengthening the squad in an effort to increase commercial revenues and diversify the revenue streams.”