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Thursday, January 3, 2013

Lions Led By Donkeys

2012 losses limited by player sales and exacerbated by poor commercial performance as accounts reveal that Everton’s off pitch activities don’t match that of the team on the pitch.

Everton have a strange hierarchy, persistently incorrectly underestimating their loyal fans they must often ask, “What do these people want?” The answer is simple; Evertonians want the board to give what is needed for the club to be successful in the same way that the manager, the staff and the fans give what is needed.

2012 was a year of a quiet revolution at Goodison Park. It began with the mid-point of a season which had so far witnessed the 2009 FA Cup finalists and European contenders, following two consecutive fifth place finishes, slip to mid-table obscurity due to two years of almost zero investment in the squad despite the club generating over £40m from asset disposals and wage savings during that period.

Earlier in that season the sale of Mikel Arteta acted as a catalyst for fan unrest when staunch supporters of the club became angry that the stench of stagnation emanating from the boardroom found its way to the dressing room.

Disenfranchised fans, tired of the excuses, tired of spin and spurious explanations that did not stand up to scrutiny, took to the streets; they exposed the behind the scenes turmoil and successfully attracted media attention to the inactivity of Everton’s board of directors.

Forced to act, the board supplied David Moyes with funds for strengthening through the disposal of Diniyar Bilyaletdinov and welcomed new additions to one of the smallest squads in the Premiership. Jelavic and Gibson were supplemented by loan deals involving Donovan and Pienaar. The impact was immediate and Everton climbed the table to narrowly miss out on European qualification.

Further disposals in the summer, such as Jack Rodwell, allowed David Moyes to further strengthen his squad with much welcomed additions such as Steven Naysmith, Bryan Oviedo, Kevin Mirallas and the permanent re-signing of Steven Pienaar which has helped Everton see one of their best start to a season for many years.

Everton are poised to push once again for European qualification, yet the old problems at Goodison have still not been addressed and after thirteen years in charge the board appear as impotent as a pensioner on counterfeit Viagra.

The 2012 accounts are disappointing yet not unexpected and the weeks of spin provided by CEO Robert Elstone and Chairman Bill Kenwright cannot hide that fact. With over a 50% increase in their net loss, from £5m to £9m, which is only limited by the continued sale of intangible assets [players], over £23m in this period, the signs are poor. Wages, already too high a percentage of turnover, continue to increase due to enhanced contracts, new arrivals and most importantly diminishing turnover. Other operating costs remain relatively static at £23m despite employing a company specialising in cost reduction. The accounts are poor and despite the knowledge that substantial increases in turnover due to vastly improved TV deals are on the horizon the organic business development for which the club are wholly responsible remains appallingly inadequate.

Everton’s real problem isn’t expenditure, all premiership football clubs are expensive businesses to run, its income and their inability to address the problem sufficiently has led to us falling behind others who better exploit their commercial worth, by signing multi-million pound deals such as those with kit suppliers. Everton are left trailing here and it’s apparent that with a representative kit deal Everton would actually be in profit or at least at breakeven. Although the new Nike deal isn’t included in these accounts it’s significant that Everton did not negotiate this deal but revealed that no extra money would be forthcoming from it after the media reported it being worth $16m a season; a not unrepresentative sum when you look at the deals enjoyed by Everton's peers.

The root cause of this poor commercial performance is the same as why we have one of the smallest squads in the premiership, one of the poorest stadiums in the premiership and why we are now equalling the most barren period in the clubs history in terms of winning trophies and that root cause is a total lack of any form of external investment. Not one of the current board of directors has invested a single penny into their business; there’s been no investment in anything which would lead to improved turnover and profitability; a strategy which has seen the balance sheet with £20m of assets in 1999 turn into one that has nothing but tens of millions of liabilities today, £43m to be precise, a £10m increase since last year alone.

A full copy of Everton's 2012 accounts can be obtained here.

Tony Barrett of The Times, a life-long Liverpool supporter who’s been described as a chief apparatchik of one of Liverpool's supporters groups, made an interesting observation yesterday when he highlighted the need for investment in David Moyes’ squad if Everton are to have any hope of competing with the teams that will strengthen in this transfer window in their bid to push for lucrative European qualification.

That Moyes has made this request to the board is significant. That the local press report that this request wasn’t made is typical; they also report Everton’s accounts exactly how Everton report them on their website. Sadly the fans who believed that Everton were a well-run club twelve months ago will believe the local press again, whilst others will once again see through the spin and PR and hope and pray that more people in the media follow Tony Barrett’s example which can be seen below.

Time for Everton board to put hands in their own pockets to back Moyes

The month of January been billed as pivotal to the future of David Moyes. That, though, is to underplay and individualise its importance – the next 29 days could determine whether Everton are able to rejoin the elite or begin the process of becoming increasingly detached from it.

Over the past 11 years Moyes has slowly but surely shifted Everton from relegation candidates to contenders for Champions League qualification. It is a story of achievement against the odds, of a manager making the most of limited resources and dragging a club that had been in danger of losing their way back towards the summit of English football.

“I might not have had the money but I’ve had the time to build the club and take it forward,” Moyes said last week. “Because of that, I hope it’s allowed me to make baby steps each year, if you want to call it that. We’ve done a little bit and added every year and it has given us a little bit of chance to keep progressing.

“You wouldn’t say Everton are a club that are up and down, now. I remember my first four or five years when we might finish seventh or eighth one year, fifteenth or sixteenth the next. We were a bit like that. I don’t think you see Everton like that anymore. I think you probably see Everton finishing in the top half of the Premier League.”

Moyes still may not have a trophy to show for his efforts but by restoring stability and raising ambitions, he has given Everton a prize that many in football thought was beyond them when he took over as manager in March 2002. But having built Everton up to what they are now – a team that massively out-punch their own financial weight – he knows better than anyone else that the time has come to at least try to turn those baby steps into a giant stride, or else risk stagnation and possible regression.

That is why Moyes has asked (and this word is key, because he hasn’t made any demands or issued ultimatums) whether the Everton board could release funds to him during the transfer window. He wants them to take a calculated gamble on his judgment and record in the transfer market by allowing him to speculate to accumulate.

Should Everton win away to Newcastle United tonight they will go within three points of Tottenham Hotspur who occupy third place in the Premier League. Even in the event of them losing at St James’ Park the gap will still be only six points, a far from irretrievable deficit in such a competitive league, particularly when it is taken into account that only Manchester United and Manchester City earned more points than Everton in the last calendar year.

Champions League qualification, therefore, is clearly within reach for Everton. If they were to jump aboard the European gravy train next season it could be the catalyst for them to become more competitive in the domestic game than they have been at any time since the mid-1980s. A potential transformation of their stature and ambitions is at stake but it could be an opportunity that is squandered unless Moyes is given the financial backing that he so richly deserves.

Moyes has always been adamant that he would never ask Everton for money that they do not have and that he wouldn’t dream of putting the club at the kind of risk that led to the downfall of Glasgow Rangers. Gambling with Everton’s future just isn’t something he would do. He would, however, want the club to do everything in their power to ensure that they are as competitive as they possibly can be, to recognise when the time is right to show ambition and invest in the future.

The reality is that over the past two and a half decades there has rarely been a better time than now for that to happen. The Premier League’s new and highly lucrative television deal kicks in next season and one expert on football finance has predicted that Everton’s annual TV revenue will rise by almost £20 million as a result. Moyes would like a portion of that money to be made available to him now, not all of it, but a significant enough sum to allow him to make the additions necessary to give Everton their best possible chance of finishing in the top four.

In one sense, it appears an impossible request. Everton’s credit facilities would not allow them to borrow the money that Moyes is looking for. As a business, it is beyond them. But that shouldn’t mean it is the end of the matter, not when Everton’s board includes Robert Earl who features on the Sunday Times Rich List, having amassed an estimated personal fortune of £240 million. That is without even mentioning Lord Grant Chester, their fourth largest shareholder and former director who is worth £1.2 billion, or Jon Woods, a non-executive director of the club who sold the Ocean software company he co-founded for $100 million in 1996.

There is money at Everton, but it is for the personal use of those who possess it rather than the greater good of the club. This, of course, is wholly reasonable. Clubs should be run as businesses rather than at the whim of seemingly benevolent billionaires and no director should come under pressure to fund signings out of their own pockets. But there can still be a halfway house, a way for personal interests to support those of the club. Given that one of his ancestors loaned Everton £1,000 to build the original Goodison Road Stand back in 1892, Woods probably knows this better than most.

There is nothing to stop any of these wealthy individuals from doing what the banks won’t – namely allowing Everton to take out a short term loan that would be repayable as soon as the club receives their first instalment of the new TV deal. David Moores, like Grantchester an heir to the Moores fortune, did something similar in 2006 when he went well beyond his role as the chairman and major shareholder of Liverpool by loaning the club £10 million to allow them to sign Dirk Kuyt.

The Holland forward went on to become a key player in the Liverpool side who reached the Champions League final at the end of that season and who continued to qualify for the competition until 2010. It was arguably the best loan deal that Liverpool have ever done and while the club enjoyed the financial benefits of their continued seat at European football’s top table, Moores was able to bask in the glow of having played his part before the loan was paid back to him in full.

Should one of Everton’s wealthier senior figures do something similar now it could help transform the club and it is hard to see how they would have anything to lose by doing so as a short-term loan could easily be secured against future TV revenues. It would also allow Moyes to conduct business now, in advance of other clubs who will wait for their income from television to increase before adjusting their transfer budgets upwards, an inevitability that will serve only to heighten competition for players and have an inflationary effect on fees and wages.

January could be the most cost-effective time to make a move, which means doing nothing or next to nothing this month could be a false economy. That is without mentioning the doomsday scenario which would lead to Moyes’s quitting Everton in frustration at the financial glass ceiling that prevents him and them from achieving their potential.

There is nothing to suggest that this will happen but, equally, there is nothing to suggest that it won’t, particularly with Moyes in the final six months of his contract. Were he to walk away at the end of this season, Everton would not only have to replace the best manager they have had since Howard Kendall, they would also probably have to pay for his successor to leave whichever club he is at. At a time when many managers have buyout clauses that can be as costly as players’ – Chelsea paid Porto £14 million for Andre Villas-Boas, while Liverpool stumped up £5 million to take Brendan Rodgers from Swansea City – it would surely be in Everton’s best interests to ensure they do everything to ensure that they do not have to enter that kind of market.

The limitations of Moyes’s squad were laid bare on Sunday despite Everton’s impressive performance against Chelsea. Trailing by two goals to one and with the clock running down, a supporter in the Main Stand beseeched the Everton manager to make a change. On the substitutes’ bench, Moyes had seven players to choose from who had started only 26 Premier League games between them. Having seen a depleted starting XI worth around a third of what Chelsea paid for Fernando Torres and Eden Hazard alone push the European champions so hard, Moyes was in the unenviable position of having no solutions available to him.

When that happens, when a manager doesn’t even have the sows ears he needs to carry on creating silk purses, then it is up to others to do something about it. David Moyes has done all that he can and more for Everton but as things stand Everton could not say they have done all that they can and more for David Moyes.

That could change this month. If the will exists and the opportunity is recognised, someone with the necessary imagination, resources and belief in their manager could give him the backing he needs to take Everton to the next level. Whether it will happen is another question. Is there anyone at Everton with the means and the acumen to act as Jon Woods’ ancestor did 120 years ago by using their own wealth to help the club achieve their potential?

Tony Barrett The Times January 2nd 2013
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