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Friday, September 16, 2011

The Story of The Blues

Click to watch NSNO coverage

On Saturday The Blue Union comfortably demonstrated that their numbers were far greater than the 50 to 60 isolated militants Everton attempted to portray them as; 500 a week earlier has developed into, well, we’ll let you decide, click the photograph on the left.

To the horror of Everton’s watching hierarchy, mutterings of discontent, once safely confined to the relative obscurity of the internet, exploded into a deafening roar that echoed around the tightly packed streets and no doubt rattled the fine crystal on the tables in the newly refurbished Dixie Dean suite.

The powerful pre-match message was clear; enough is enough, it’s time for change. The response from the club has been disappointing but not unexpected; amongst the clamour to refute the extent of the unrest there is the usual dismissive stance that mere Everton fans couldn’t possibly understand Eveton's business problems and the suggestion that most clubs are in a similar predicament; except they’re not, the actions of our board have once again placed Everton in a precarious position and the directors, unable to deliver a solution, are steadfastly refusing to listen to their fans who, over the years, have proven themselves to be astutely aware of off field topics time and time and time and time again.

It would be a major managerial misjudgement to attempt to totally ignore this growing discontent, but if there was an Olympic category for major managerial misjudgements Everton would surely be the reigning world champions. The club’s approach in the past has been to bury Everton’s boardroom failures under a barrage of sentimental idiocy that is all too readily conveyed by myopic journalists unwilling to see past the comfortable label of, “plucky little Everton run by the fan from the boys pen.”

Predictably, we’ve seen the emotional, factually bereft articles and just the plain misinformed pieces appear on cue, we’ve had the contributions from ex-players such as Andy Gray and Graeme Sharp who have loyally manned the pumps whilst the directors have manned the lifeboats. But the myth does little to alter reality; KEIOC’s very reliable source, from within the club, has revealed that Everton have recently been close to financial meltdown.

Outside the stadium on Saturday The Blue Union specifically asked fans to focus on the issues, ignore the individuals and loudly and enthusiastically get behind the team. Inside Goodison the atmosphere was a clear improvement over recent matches and we at KEIOC will always encourage all supporters to get down to Goodison and show your support for our team and our manager.

Whilst it was indeed disappointing that some fans chose to boo the chairman on the screen, it was equally disappointing that the club’s management chose to adopt a policy, since confirmed, despite an initial denial, which promoted potential division amongst the watching fans whose focus was on the team after they had scored a goal.

Little comfort should be derived from the respectful applause delivered by some sections of the crowd towards the chairman; it should be of greater concern that the vast majority sat in bemused silence, but not as much of a concern as the deafening silence from the 7,000 empty seats on a day when all other stadia in the Premiership were beyond 95% capacity, save for Sunderland who still managed a higher attendance than our 82% take-up.

Of equal concern is the disturbing return to the old Kirkby tactic of encouraging current players to issue prepared statements. The Blue Union had explained to the players and David Moyes that their campaign was focused on the club’s board of directors; the danger here is clear and you have to wonder who advises the club of these tactics. Football fans are fickle if things aren't to their liking on the pitch and highly paid players should be wary of a negative backlash from fans who contribute £20m per annum to their salaries.

Player’s wages are often seen as the root cause of the problems facing all those premiership clubs that struggle financially. In Everton’s yet to be published accounts the small increase in turnover - gate receipts 10% down, broadcasting up by £3m and commercial revenue up by £2m - is completely taken up by a £4m increase in wages.

A failure to control costs against a turnover that cannot be increased at the required rate, due to the reason all of us are only too familiar with, the stadium problem, has inevitably led to action being demanded by our lenders. The stadium problem, which has been holding Everton back for years, has still not been addressed and it is now clear that the incumbent directors are incapable of providing a solution to this complex problem.

Although far from a permanent solution the temporary fix, to rectify our current predicament, is to reduce costs through reducing debt and cutting the wage bill. The staff and their agents took over £61m from the £82m turnover in 2011, by far the greatest cost to the club; they take an incredible 75p from every pound generated by Everton.

Despite producing an additional £16m from the sale of assets last year, essentially players and property, all of which went on reducing debt, which in turn lowers costs, the net debt remained, as of May 2011, at £45m; so you can begin to understand why, outside of the accounting period discussed here, the sales of Vaughan, Yakubu, Beckford and Arteta were necessary and why David Moyes ultimately received no budget whatsoever. You’ve heard the excuses and the spin, you’ll continue to hear them; these are just the facts that certain people attempt to keep from Evertonians in the mistaken belief that it will somehow make the situation at the club better.

However unpalatable this temporary fix, it should help our financial position, the danger however is very clear. Leeds is often held as the benchmark in football club mismanagement, they borrowed heavily to fund success on the pitch; it was a gamble they lost, and having lost, they paid a terrible price.

Everton is performing a Leeds in reverse; we’re not buying, we’re selling in the hope that we will succeed in remaining afloat in the premiership; this information from the Premier League graphically illustrates the precarious nature of our squad and the results of the savage cost cutting measures that have taken place.

Whilst the temporary fix should provide survival, we’ve seen on too many occasions that without a real solution the debt will simply return again; Everton was in serious financial difficulty before the £30m prudential securitisation loan was delivered; a couple of years later the Singer & Friedlander loan and the sale of Wayne Rooney saved the business once again and now, directly from the chairman, we learn that the bank was about to “kill us”. Obviously a more permanent solution needs to be sought; keeping our fingers crossed and hoping for the best isn’t an option.

The reverse psychology, being careful what you wish for, has had its day; what many fans warn against is already here. There are now two documented occasions, at least, when the board have proven themselves incapable of acting in the best interests of the club; Kirkby and the admission that they were ready to sign the club over to a fraudster from Singapore [later Thailand] who presumably had matched their asking price as due diligence was undertaken. Would you really trust these people with the future of Everton Football Club?

In a bid to unravel the mystery of why Everton can’t be sold and to progress the decade long quest for owners with a business plan that addresses Everton's issues,  The Blue Union advocate outsourcing the sale function to an autonomous group of professionals of the calibre of Martin Broughton, PCP Capital Partners and Barclays Capital.

One glaring problem with the sale surrounds the clubs valuation; it is believed that the directors seek a profit on their circa £22m purchase of shares. It may be anathema to them, and to the share buying public in general, but why should a profit be automatically expected when they have done nothing to enhance the business? Buying shares carries a risk, sometimes you win, sometimes you need to take a haircut.

The current directors have managed to transform a poor business into a truly awful business. Look at it from a potential purchasers perspective; the club has been £45m in debt and with most tangible assets, save for the stadium, having been disposed of, the balance sheet has a negative value of -£35m, future revenue streams have been borrowed against, the squad is threadbare, starved of investment, the attendances are falling and their greatest revenue generating source, their stadium, already used as security for a £30m loan, needs substantial or sustained investment.

On the plus side Everton are in the Premiership, we have a manager with a track record of securing impressive finishes against meagre resources, a decent academy,  we have a loyal fanbase, a rich history to exploit, something money cannot buy, and we’re located in a city that is synonymous with football, a city that is perhaps finally waking up to just how important football could be to the regeneration of the North of the city.

Any potential owner must be able to demonstrate suitable resources, ability and a desire to take the club forward. How much of these resources will be available to the club will depend on the club’s valuation; the primary criterion should be based on the club’s future wellbeing and not simply money in the pockets of the current directors seeking a vast profit on the purchase of shares; when did we start rewarding failure? How close that valuation is to the current level of debt depends on how much the club really does mean to the people our chairman speaks for.



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