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Everton Financials Released; Fans Panic As Usual

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The release of Everton's 2011/12 accounts has drawn a predictably nervy reaction from the fans, concerned about the financial stability of the club. But just how bad are the numbers? Brian Lewis delves a little deeper....

Chris Brunskill

Everton Football Club has released their financials for the 2011/2012 season, and they do not paint a pretty picture to the fans. Including debt interest and player transfers, the club lost 9.1 million pounds pre tax. This was up from a 5.4 million pound loss the previous year. The one good piece of news is that the outstanding debt only rose to 46 million pounds from 44.9 last year.

As usual these numbers have brought out the fans on both sides of the aisle, but the top-level numbers do not always tell the full story. For that we have to look at some of the smaller numbers to see just how dire Everton’s position is.

Taking a look at Everton’s turnover, it is very easy to identify the problem. Income was down by 1.5 million pounds partially due to attendance. Attendance dropped to an average of 33,209 from 35,157 the previous year. This drop in attendance was worth approximately 1 million pounds in just ticket sales if the average ticket price is assumed to be 25 pounds. Factor in concessions, merchandise sales, and other income from matchday, and the drop in attendance ends up being even more severe. Thankfully attendance seems to up during the current season. The average attendance through December is approximately 36,200.

To see just how much money the club is leaving on the table, the club has a highest attendance of 39,657 this season. If Everton sold out every game last season, they would have made an additional 3.5 million pounds based on 20 home games. I decided to account for at least one home game between the League and FA Cups.

That is simply too much money to leave on the table at Everton, and the club has to take immediate steps to help boost ticket sales. Just an additional increase in gate receipts is enough to cut this year’s loses by one third.

On the TV broadcast side, the total amount of money only decreased by 100 thousand pounds, but given the increase in money the EPL receives from television contracts; it was a much larger decrease. This decrease was mainly due to a lack of television appearances this season. Everton’s poor form early in the season resulted in fewer live TV appearances, which reduced their television revenue. This year the club has already improved this due to a fantastic start that has resulted in seven television appearances to date.

Frankly there is not much the club itself can do to rectify this situation. Other than quality performances each year, EFC cannot approach television executives and make offers for live TV appearances. Thankfully the club seems set for this season and the next based on recent performances.

The biggest concerns for the club come from sponsorship and other commercial interests. Sponsorship money increased from 6.8 million to 7.1 million pounds, but commercial activities decreased from four million to three million pounds. Unfortunately these financials do not break down what makes up each of these categories, but lumping them together we can assume it includes the following income: Chang Beer sponsorship, all other ads and sponsorships with the club, Kitbag deal for merchandise, any money from Nike, any income from the Australia preseason tour, any other sources of income for the club.

Getting 10 million pounds for all of this is frankly disappointing. Given the history and current success of Everton, I would think that the club could command a much more sizeable shirt sponsor deal. Everton is an internationally known club, and thanks to stars from countries such as Australia and the US, their profile will only continue to grow. The continued partnership with Chang smacks of a club that isn’t willing to do the hard work to bring in bigger sponsors. Looking at clubs like Spurs, Aston Villa, and others of similar size, Everton should easily command 10 million pounds a year just for the shirt sponsor. Add in all the other sponsors and the club would be in much better shape.

We also have to talk about the Kitbag deal. The club gets 3 million pounds a year from Kitbag, and possibly a slice of the profits based on sales. Whatever the exact deal is, it sucks. International distribution is pretty poor compared to other clubs, especially now that our jerseys are made by Nike. Here in the US I have yet to find an Everton kit in my local stores, but I can find every other EPL Nike jersey when I go in. This is simply inexcusable, but I don’t believe it is fixable until the Kitbag deal is up in six years or so. Hopefully by then we have someone with business sense actually running the non-football side of things.

A quick bit on expenses, the wage bill rose to 79% of turnover. Obviously this is a worrying number, but if fans want to see Everton continue to perform well then high wage bills will be a fact of life. Unless we can turn into a club like Lyon which is always looking to sell young talent and develop exclusively from our own academy we will be doomed to a higher wage bill than we’d like to see. It is nice to see we managed to reduce operating expenses slightly. Even though it was slightly less than 1 million pounds, every bit matters for the club.

Up until now I haven’t talked about player trading in expenses or turnover. This is partially because the money we get from buying and selling players isn’t as cut and dried as it would seem. For example when Everton sold Jack Rodwell this past summer, the club did not receive a 12 million pound cheque the next day. Rather a contract was drawn up and we will receive the money in payments over the course of a few years. This is usually when you add up net transfer spending and then look at a clubs books, the numbers can be off by millions of pounds.

Evertonians often comment about the club having to sell players to balance the books, and while it is a factor, as explained above it isn’t as clear as you would expect. That said, the club spent 12.8 million pounds on player purchases this past year. A lot of that money undoubtedly went on purchasing Jelavic, Gibson, and Pienaar; but some of it could also have gone to paying off purchases of old players.

The good news is that the club made 14.1 million pounds on selling players. A large chunk of this came from selling Mikel Arteta to Arsenal, as well as money for selling Yakubu and Beckford. Some of the money also came from previous sales.

It has to be said that Everton’s finances aren’t great. A total debt of 46 million pounds is never a good thing for a club that only has turnover around 80-85 million pounds. The positive is that if push comes to shove, the board has the personal income to cover the debt in a worst case scenario. This isn’t like Portsmouth where the money doesn’t actually exist and it is all smoke and mirrors. The debt still should be paid down as quickly as possible. I’d say about 20 million pounds in debt is manageable for a club like Everton, and all businesses run with some amount of debt.

Thankfully the path forward seems clear even without real investment coming to the club. Improving ticket sales would cut our losses tremendously. Add in some improved sponsorship deals, and the club could actually turn a profit not even counting the uptick in tv money that comes from a quality season. The question is if the board will actually take these steps, or if they will just try to mortgage the future in an attempt to satisfy Moyes until we have to blow up the entire squad.