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Is a lack of communication causing a crisis of confidence ?

September 12, 2017

the esk


We’re 19 months into the Moshiri era. In that time, we’ve seen him buy 49.9% of the club’s shares, have an option to buy another 23-24%, he’s repaired the balance sheet, changed the management team and structure of the non-playing staff, spent heavily in the transfer market, acquired Bramley Moore – the iconic dockside future home we’ve dreamed of, engaged one of the world’s leading architects to build our stadium, and we’ve European football once more.


On the face of it all good and progressive. So why is there a crisis of confidence among many Evertonians and such a feeling of unrest?

Early performances on the pitch this season haven’t helped, nor has the failure to complete the very good work of earlier in the transfer window, yet the unrest goes deeper than that in my opinion.

It’s a theme spoken about previously, but in my opinion the lack of communication from the club is a significant contributor to how many Evertonians currently feel.

It may be no surprise to hear me say that I believe communications is an essential discipline in the theory and practice of corporate leadership.

In many businesses, the value of communication is over-looked, many senior executives and board members consider communications to be a soft priority given it appears to lack well defined, tangible parameters and outcomes.

In private companies (such as Everton) where typically the board is occupied by major shareholders or those representing major shareholders the willingness to communicate is even smaller. It’s as if because there’s the absence of “public” in the description of their legal entity (as in not being a public limited company (PLC)) then the business skill of communicating is not required.

However, nothing could be further from the truth, particularly in the case of a football club with a much more complex relationship with external stakeholders (fans in ordinary language) than a usual commercial business.

Communications is a strategic instrument. If used correctly it has many benefits – it clarifies the ambitions of those in charge, it allows for accountability, measuring actual performance against stated objectives, and critically it allows (in the case of football) fans to understand the destination and the route of travel of their beloved football club.

In doing the above it removes many uncertainties, it stops the often-negative assumptions and frankly wasted energies of people wondering what an announcement means, or people (fans) chasing news which for good reasons may not be due for several months.

Two examples of this would be the “Person with significant control statement” yesterday which caused a lot of people to ask about what the major shareholder Farhad Moshiri had/had not done, and as a second example the constant desire for information on the stadium “Dan, when are the designs due?”

Now I’m not expecting the club to react to every piece of news, regulatory or otherwise or answer every social media enquiry as to the progress of the stadium but a broad communications strategy that said (for example) “Farhad Moshiri does not expect to add to his holdings before exercising his options”, or “we anticipate stadium designs to be published sometime in the 4th quarter of 2017” would go a long way to giving fans comfort and actually using their considerable energies on more constructive ways of supporting and communicating about the club.

Communications are both verbal and non-verbal. The clearest example of non-verbal communications by the club are the activities of the Everton in the Community. These activities not only produce real tangible benefits to everyone the organisation touches but pump out hugely positive messages and values associated with Everton. It is the clearest example of positive non-verbal communications I can think of, and says a huge amount, all of which is hugely beneficial and positive for both the recipients but also the club itself.

The puzzle for me is why an organisation can be so good at communicating this aspect of their activities but be so poor in overall communications, particularly the core activities that support our principal activity, football.

Let’s assume for a moment the club agreed to look at its communications strategy and decided to do something about it. What should it do?

In our podcast, Everton Business Matters, John Blain often talks about a Chief Engagement Officer whose role is much greater than communications, but ideally it would be for him to communicate in at least two different ways. (In the absence of a CCO, then you’d expect the CEO to communicate on behalf of the club and from time to time shareholders)

Firstly, an “address the nation” type speech or presentation. This would be much more significant than the Chairman’s report or CEO’s comments in the Annual Report & Accounts which by necessity are backward looking and considerably out of date by the time of publication.

It would be an annual “this is where we are, this is where we are going, this is who is going to do it and this is how we will do it“ communication which says clearly and unequivocally  these are our aims on the pitch, i.e. what we hope to achieve in the coming year with the first team, with the U-23’s and with our academy This is the structure, these are the roles, and these are the people who have responsibility for each part of the operation.

Similarly, off the pitch – this is our aims, this is what we are doing – commercially, planning for the stadium, planning for the future – this is our vision both long term and what we expect to achieve in the next 12 months.

In essence, a medium to long term strategy and vision about the future of the club, broken down into near term objectives over 12 months and then longer term.

Essentially it should demonstrate that the owners and board have at least the same ambitions (hopefully grander) for the club as do the supporters.

The second element would be timely updates or responses to events as they occur throughout the season and off-season, be it progress on matters or a particular happening. Just acknowledging we are on course for the stadium, or comment around FFP and the impact or not it has on the club helps the engagement process and reduces misinformation, fear or lack of confidence.

One of the reasons often cited for lack of communication is a lack of trust, a fear that objectives stated will be used against those that perhaps don’t achieve all that is set out. Well, the fact is that supporters have expectations of their own regardless of whether the club communicates or not. My point is that through communication those expectations can be understood and managed.

The managed element is important. I don’t mean managed in the sense of playing down expectations nor hiding unwelcome news. I mean that a regular flow of information and updated when required allow expectations to be realistic, as well as keeping those in charge accountable.

The Press and media have a role in communications too. It’s a topic worth of discussion in a single article, but as has been said many times before the benefits of good media relationships are huge, not only in terms of short term news flow and information but in terms of presenting the club in the most favourable and useful (in terms of strategy) light.

Returning to trust for a second. Whilst an often-used reason for deliberately not communicating is a lack of trust, it is the opposite which is entirely true. A lack of communications definitely leads to a lack of trust, it is counter-productive and almost always negative and damaging.

In a sport that is becomingly increasingly competitive at a more rapid pace, we as Evertonians have for the first time in a generation genuinely exciting things to look forward to on and off the pitch. We are a massively improved organisation from 19 months ago, in competitive and commercial terms with a huge way still to go. We the fans would like to take that journey together with the club, but much better informed in the near and longer term about plans, ambitions and progress.

A forward-thinking club should and would engage in this process, knowing the benefits that derive from such a strategy.

Over to you, Everton.

Everton, the board and shareholders

July 29, 2017

the esk

I suppose this could have been written at any time over the last 20 years, but I’d like to examine the relationship between the club, the board and shareholders.

The reason for doing so now as against the more troubled times of the past may not be immediately obvious to the casual observer, but I believe given the change that’s running through the club currently it’s a good time to examine the issue more carefully.


Let’s walk through where we stand currently in terms of shareholders and then Board members.

Shareholders first. Everton have 35,000 shares issued and are currently held by the following (as per the last published accounts):

Blue Heaven Holdings Limited* 17,465 49.90%
William Kenwright 4,256 12.16%
Jon Woods 3,116 8.90%
Lord Granchester 2,773 7.92%
Estate of Sir Philip Carter 714 2.04%
Others 9,792 27.98%

*Farhad Moshiri is sole beneficial owner of BHHL

The Board consists of the following:

William Kenwright Chairman
John Woods Deputy Chairman
Robert Elstone Chief Executive Officer
Denise Barret-Baxendale Deputy CEO
Alexander Ryazanstev Non Executive Director
Dr Keith Harris Non Executive Director

The Board holds or represents the holder of, (if we accept that Ryazanstev is a director representing the interest of Farhad Moshiri) 70.96% of the shares of the Company. A figure which has roughly reflected the number of shares the board has held or represented for many years, certainly as far back as May 2004 when Anita Gregg was elected to the Board.

Thus, it is fair to say that shareholders representing 30% of the issued shares have had little or no say in the management of the company for over 13 years.

I can see the argument that the Company as a private company has very few obligations to report to or listen to the thoughts of the smaller shareholders other than through the General Meetings and annual report and accounts. However as has been discussed before, Everton, like other football clubs are unlike usual companies. Given the connection between club, community and fans (some of whom are shareholders) there’s arguably an equitable obligation (even if not strictly a legal obligation) to do more in my opinion.

The relevance of this debate, and the timing of it, is due to the extra-ordinary changes that are occurring within the club.

We have entered a significant expansionary phase in our finances, and the club in the next few years will bear very little in resemblance to the club of just a couple of years ago.

Be it the loan (£80m) provided by Farhad Moshiri to repair the balance sheet, the credit facility (£60m) provided by ICBC, or the significant funds (£3-400m) about to be raised to fund the stadium, shareholders representing 30% of the club have had little or no input, or indeed information about how these changes affect the business that they continue to have ownership of.

For large quoted companies there is a code imaginatively call the UK Corporate Governance Code which examines and suggests best practices for large businesses. Whilst the provisions do not apply to a company such as Everton there should be no reason why the principles behind the code shouldn’t form part of Everton’s structure, accountability and governance strategy.

A key area is communication. The code offers the following principle:  The board should keep in touch with shareholder opinion in whatever ways are most practical and efficient. I have to ask how the current board are achieving this? Is it through the Shareholder’s Association – although not a member myself I do not believe that to be the case. Perhaps several of the other more significant shareholders are privy to more than the 1500 or so small shareholders who have to rely upon the General Meetings and Report & Accounts.

My question is in this age is this sufficient information and engagement given how easy it is to communicate these days?

One area the code is very clear on is the area of independent directors, explaining what is an independent director and the benefits of having such.

There’s a recommendation that the board should have an appropriate combination of executive and non-executive directors (and, in particular, independent non-executive directors) such that no individual or small group of individuals can dominate the board’s decision taking.

 As can be seen from the board composition above, Everton fall significantly short on this provision with only one potentially independent director (Dr Keith Harris) whom depending upon the source used and the reasons for him being on the board may not be independent at all.

The Board currently has two senior executives (the CEO &  Deputy CEO), two directors (the Chair & Deputy Chair) both still significant shareholders, and Ryazantsev who whilst bringing much-needed external expertise to the club’s affairs clearly represents the interests of Moshiri. With the addition of Harris mentioned above, then there’s little evidence of independent representation.

Since Moshiri acquired his 49.9% holding we’ve seen a huge change in our finances (part event-driven but more significantly due to his ownership), a huge change in football management and playing personnel, plus the growing certainty of a move to Bramley Moore Dock.

All huge positives, however the one area we’ve seen no significant change in is the governance of the club and the representation of and communication with the owners of 30% of the company.

In reference to governance, I mean bringing independent talent into the boardroom to challenge and question (constructively) the direction of the directors who are either executives, major shareholders or representatives of major shareholders.

 We are a growing business that needs fresh talent and independent thought in our board room. As a growing business we face fresh challenges requiring different skill sets from the survival strategies of the last 20 years or more.

We also need better communications, a common theme with all stakeholders, but none so more relevant than with the minority shareholders, who in all likelihood, will support the direction of travel, yet would appreciate the courtesy and commonsense of a more inclusive strategy and engagement.

 We are progressing as a club and business no doubt, yet on board composition, several aspects of governance, and small shareholder communication and engagement still way off the pace.

NSNO from the board room down.

Updated thoughts on stadium financing, the ICBC deal and potential funders of Bramley Moore

July 15, 2017

the esk

Who will be financing the Bramley Moore Stadium development?

Bear with me on this article. It’s a little technical, but hopefully written in an understandable manner – it draws conclusions from what is in the public domain which may indicate the possible providers of the stadium finance.

Just over 3 months ago the Liverpool City Council released a relatively short paper outlining the proposed (but not agreed) “heads of terms” for providing financial guarantees to assist Everton in finding finance and most importantly lowering the cost of the financing through the provision of a guarantee. The City backed guarantee will be paid for by Everton in annual payments to the City providing the City with much needed income (around £4.5 million per annum)

As you would expect much of the detail in the paper outlined the various security measures required by the City Council in order to provide the guarantee. The main measure is what has been called a security package and comprises of two accounts:

The first is a “Cashflow account” from which on 31st August each year the annual rent will be paid to the SPV.* This is secured by Everton paying in all season ticket revenue, hospitality fees and naming rights income into this account. Only when the rent has been paid will Everton have access to the remaining funds in the account.  (Note this may be the reason for Everton selling the maximum number of season tickets it can whilst still at Goodison Park)

SPV  definition*: Often used in the commercial world. As a separate legal entity it allows businesses and public bodies to park particular projects or investments in a stand alone vehicle. In this case the SPV, owned by the Council collects the rent, pays the financing costs to the funder, and provides the Council with its guarantee fees. The SPV serves to protect the interests of all parties, largely separate from their other activities.

The second account is called the “Rent Deposit Account” and that provides security for the Council by requiring Everton to make payments for the first 5 years of the lease. If we happened to be relegated within that time we would use our parachute payments to meet our obligations.

How much is required to fund the “security package”?

In page 3 of the Council document there’s a line which describes the security package “as three times the level of rental payments”

Now the rental payments haven’t been agreed or disclosed as yet, but simple calculations of loan repayments over 40 years, and the inclusion of the guarantee fee suggest rental payments of £15-20 million a year initially.

Thus it’s reasonable to assume that the security package provided will be in the order of £45-60 million. This is the reason for my comments on twitter that the club had a significant cash call in the next year or so.

ICBC Credit Facility

At the end of June, Everton announced a ground-breaking deal with the Industrial and Commercial Bank of China. ICBC is recognised as the largest bank in the world by assets and tier-1 capital, and is owned by a company called Central Huijin Investment, which in turn is owned by the Chinese Government. Given the importance placed on football by the Chinese President, Xi Jinping – the importance of this deal should not be lost on anyone.

The deal is to provide £60 million of credit over a three year period “to support the club (Everton) in managing its working capital requirements throughout the season”. There is provision within the documents to increase the line of credit for any legitimate purpose.

As security for the deal ICBC have numerous charges including a fixed charge on our broadcasting revenues through the Premier League, charges over several bank accounts, security on land and a floating charge on all other assets.

So, on paper we have two different forms of credit and funding – the stadium secured by the Council guarantee and the security package (secured against season ticket and naming rights) plus a £60 million facility provided by ICBC secured against our Premier League payments plus other assets belonging to the club. All of that seems relatively simple and logical.

However, on the day of the City Council announcement the Mayor of Liverpool, Joe Anderson said “Liverpool Council will have first take on season tickets, on the players themselves, on the naming rights, on the ownership of the stadium and of the television rights.”

Now there’s no doubt that he’s correct over the season ticket funding, naming rights and ultimately the Bramley Moore stadium itself but he can’t be correct over the players (other assets) and the television rights (Premier League payments) as they’re charged in favour of ICBC.

The question I suppose is that is this just loose language by the Mayor or does it indicate closer relationships in the future?

The City Council provides the guarantee for the SPV to provide the finance for the stadium, that is clear. In the event of default the City Council guarantees payment to the SPV, and in doing so would take control and ultimately ownership of the stadium. In doing that the City Council would then seek to recover any of Everton’s remaining assets (of course, this is largely theoretical – I’m not suggesting it’s going to happen). I’m sure the guarantee would allow the City Council to recover what it could in the event of it being called upon.

That’s fine except the ICBC have a charge over Everton’s other income and assets, and I doubt they would cede their senior position in a fire sale.

In the press release issued in relation to the ICBC deal Sacha Ryazanstev was quoted as saying “The new relationship with ICBC also represents an important step for us in the Chinese capital market, and we hope to develop further commercial opportunities in China in the future”.

Thus, the question I am posing is this:

Is the ICBC credit facility a way of Everton funding their security package for the stadium financing without impacting on-field activities?

If it is, then the natural extension of this and other comments would be that the stadium financing may be being provided either by ICBC or through ICBC connecting with other Chinese investors. The nature of the investment would be extremely attractive – long term debt in a foreign currency (to them), a good credit grade with high security, and index linked throughout the 40 year period.

I’m aware the above is conjecture and I’m making assumptions, but there’s a logic to the final assumption for certain. I’m hoping the answer will be provided very soon, (rightly or wrongly) as we are already beyond the initial time frame set in the document by the City Council.

Just as matters have warmed up on the pitch in recent weeks, off the pitch is likely to get just as interesting and fast moving, what a time to be an Evertonian!

Analysis of Everton’s £60m, 3 year facility with ICBC – updated 7th July to include charge information

July 5, 2017

the esk

This evening the Liverpool Echo broke news that Everton under the direction no doubt of Moshiri and Ryazanstev, have negotiated a £60 million credit facility for three years with ICBC Bank. ICBC is owned by a company called Central Huijin Investment which is owned by the Chinese Government. As such it is the world’s largest bank by total assets, and  this is their first Premier League deal.

The credit facility is totally separate from the financing of the stadium, which hopefully will be announced in the near term. It is for working capital purposes – ie normal business expenses and player acquisitions. It confirms the comments made in late March that the stadium would not affect the ability of the club to compete in the transfer market this summer.

The key parts of the facility are as follows:

  • 3 year, £60 million facility
  • The facility will be for working capital purposes, not for the stadium
  • The credit facility is secured against Premier League revenues firstly, and then other assets of the club.
  • The loan terms will be at a much lower rate than previous lending arrangements through Vibrac and Rights and Media Funding.

Details of the charges can be found here:

It does raise interesting questions in terms of the SPV being created, more comments when those details are released.

This is a hugely significant development. It opens up Everton to to the capital markets of China at a time when there is huge political interest in football both in China but globally.

Significantly it differs from other injections of Chinese capital in the Premier League and elsewhere in that it is done through lending rather than the issue of shares, as per other clubs. It is consistent therefore with the wishes of Farhad Moshiri not to issue more shares in the club, diluting smaller shareholders in order to fund our ongoing expansion.

From a footballing perspective it also provides an explanation as to why there is no pressure to sell Lukaku or Barkley (assuming we wish to keep him) despite our incredible spending spree in the transfer market.

Now several Blues may be concerned that this is a high risk strategy,but in my opinion it is not. It demonstrates two things to me.

It is a return to the world of major institution funding for Everton, an avenue closed for a number of years in the recent past.

Firstly a major bank, the worlds largest bank has confidence in providing debt (albeit secured against future Premier League revenues) to the club and in particular the strategy put forward by Moshiri. The fact that it is a Chinese Bank speaks volumes for our reach, and the status of the club financially.

Secondly, it shows huge confidence by Moshiri and the board that we are going to drive revenues forwards to meet this obligation, and that we have significant investment opportunities be it players or otherwise in front of us.

I’m finding it difficult to overstate the significance of this, in terms of the facility, the vision to allow it, the partners concerned and the potential for the future. This is truly a moment when we can say good bye to the old Everton dealing in the murky back waters of the BVI.

This is ground breaking in every sense, and a further demonstration of the new world in which Everton operate. As innovators throughout our 139 year existence, we have broken new ground again.

Not only are we excelling in the transfer market, we are now mixing it in the capital markets without cost to shareholders. It is a hugely significant moment in our history and further demonstrates our direction of travel .



Football shirt manufacturer deals – a barometer of a club’s appeal

July 1, 2017

the esk


 Shirt manufacturer deals are big business, and highly topical with the new Chelsea Nike deal starting today, as indeed is the new Spurs’ Nike deal.

 Everton are contracted to Umbro until the summer of 2019, having signed a five year deal back in 2014. As is usually the case, no official figures were released but it was hailed as our largest deal to date, doubling the previous Nike deal worth £3m a year, with an estimated value of £6m p.a.. It is thought that part of that revenue is shared with our distributors Fanatics (previously named Kitbag).

 By comparison our competitors, the remaining members of the magnificent seven have the following deals:


Manchester United £75 m a year with Adidas, contracted to 2024
Chelsea £60 m a year with Nike, reported as a 15 year contract to 2032
Arsenal £30 m a year with Puma. Reportedly switching to Adidas in 2018, estimated £60-90 m a year
Liverpool £28 m a year with New Balance, reported as a 10 year contract to 2027
Spurs £25 m with Nike, “multi-year” contract
Manchester City £20 m with Nike. Reportedly switching to Under Armour in 2018

 As I tweeted yesterday, we’ll earn circa £12 million in the next two years whilst Manchester United earn £150 million, and even Spurs will earn £50 million from their shirt manufacturer.

 Now, one of the initial thoughts is that the deal values are tied to shirt sales. Whilst there’s an element of truth in this it is not the full story as I will explain in a few moments:

Average shirt sales per annum in last 5 years plus shirt sales in 2016:

Team Av. shirt sales pa over 5 yrs Shirt sales in 2016
Manchester United 1,750,000 2,850,000
Chelsea 900,000 1,650,000
Arsenal 835,000 1,125,000
Liverpool 852,000 805,000
Manchester City 342,000 n/a
Spurs 268,000 n/a
Everton 80,000 n/a


It’s clear from the above shirt manufacturer deals aren’t just about the number of shirts sold – for example the value of the Manchester United/Adidas deal equates to over £26 per shirt sold in 2016, and in the case of Everton/Umbro  equates to £75 a shirt because of our very low shirt sales number – more on that later.

 Shirt manufacturer deals are about global exposure for global companies. Because of their knowledge of global sports’ markets it’s a fair assumption that Nike, Adidas, even Umbro know the value of association with leading sporting teams.

 Thus, for the large part, the amount a club receives from a shirt manufacturer relates directly to the club’s global presence.

 There are a number of factors that determine global presence. As we’ve discussed on Everton Business Matters, being a regular in European competition particularly the Champions League helps hugely, as does, of course, being in the Premier League. Participation in these competitions guarantees exposure.

 However, there’s other factors too. If it was just being in the competitions then most regular participants would receive similar amounts and sell similar numbers of shirts.

The biggest factor must be the brand and reach of the club itself.

Take Manchester United, now I know they’ve won huge numbers of trophies over many years, but their commercial success is down to strategic thinking. United segment the market place, looking for global partners as their major sponsors – Adidas and Chevrolet for example, and then drilling down to regional and local levels with their other commercial partners. As a result they strike multiple deals, attract very strong brands to associate with, and offer potential sponsors multiple routes to multiple markets – a compelling proposition for anyone seeking football as a means of advertising and sponsorship.

In terms of what appeals to Adidas, United tick every box, a successful football club, a huge brand, enormous exposure and association with other premium brands in the sponsorship portfolio.

 I’d suggest Chelsea follow a similar strategy and similar appeal to sponsors and shirt manufacturers. Arsenal and Liverpool to a lesser extent and this is reflected in their contract values. It will be interesting to see the value of the Manchester City deal in 2018.

 The other factor must be the abilities of the clubs themselves to negotiate contracts and sell their own proposition. Spurs for example would score highly here, their commercial acumen is widely acknowledged and I’m sure has played no small part in the deal they have with Nike.

 I’d imagine the Spurs/Nike deal is sold partially on where Spurs stand today, but most likely on their plans and expectations for the near future. I’m sure Spurs will have been able to convince Nike that with their new stadium and plans for improving performance on the pitch this potential should be reflected in the price of the Nike contract.

 With long term sponsorship arrangements, you are not only selling where you are now (to the sponsor/shirt manufacturer) but where you anticipate being over the duration of the contract. These expectations have, of course, to be backed by evidence of the planning and investment in the future in order to meet the claims made. Assuming they are realistic and attainable then you can extract value even if your club is not yet at the level proposed or planned.

All the above is fine, but what about Everton?

 We offer the exposure that the Premier League provides, and this year offer Europa League competition which will obviously increase our exposure and future attractiveness.

 As we’ve discussed on Everton Business Matters, and in my last article on here relating to Everton, the brand – we offer so much more than I believe has previously been presented. I don’t propose to repeat the argument in the last article but we have many, many positive attributes and facets to our character and brand that is not reflected in the value of our commercial deals nor the identity of our commercial partners.

 The case for breaking the existing relationship early is compelling in my book (as done by Chelsea, and potentially by Arsenal next year). I’ve obviously not had sight of contracts, but breaking in the final year of a 5 year deal shouldn’t be too expensive, and even if the terms were onerous, such should be the increase in value of a new contract that those costs should be covered.

 Not only would breaking the deal create financial benefits, it would demonstrate a new confidence in the club itself. It would demonstrate that we were proactive, had the ability to promote ourselves attractively and have the substance behind the arguments to gain the support of major sporting companies.

Spurs, whilst ahead of our game in terms of development and recent achievement, have proved it possible to enormously increase the value of their commercial deals (the Under Armour deal was worth £10 m a year, Nike now £25 m), yet I don’t believe have as strong and attractive a brand as we have if presented properly.

Thus, if the executive of the club firmly believe, as I do, that the prospects of the club are now significantly more attractive, and that our global presence is about to expand hugely we should be calling in the executives of all the major manufacturers to name their price for being associated with our future success.

 As the title of this article says, shirt manufacturer deals are a barometer of a club’s global appeal. The Everton barometer was last set back in 2014, it’s time to re-set it to reflect where we now are, and where we are going. In doing so the additional funds will help us on that journey, further closing the gap with our peers.  By contrast to not do so is a wasted opportunity, allows our competitors to move further ahead and may suggest we are not as confident commercially as we should be.

Everton – the brand and the opportunities

June 26, 2017

the esk


On The Blue Room we recently published Episode 5 of #EvertonBusinessMatters. The subject was Everton- the brand, and the discussion has created a huge amount of comment. I thought therefore I’d expand further on my views.

I suppose most fans of most clubs see their club as unique, and in one respect they’re right as every club is different. However, I’d challenge any English club to demonstrate a brand which is as complex, rich, omnipresent in league football and embedded within the game and community as that of Everton.

Perhaps it’s the competitive nature of club football that very little attention is given to an identity outside of the club itself. But in the context of global marketing (and leverage from currently stronger brands) think for a moment about the position we enjoy. We’re the senior club among 4 of the most recognisable clubs in the world, all in a tiny corner of England. But that tiny corner spawned league football. In the same way industrialisation arose from the County of Lancashire, so did League Football and ultimately the behemoth that is the Premier League. We, of all the founding members, have maintained (apart from two very short periods) our position at the top of the domestic game, and when the circumstances of resource and talent have coincided briefly at the top of the European game as well. That is a huge part of who we are, and what we offer to branding (sponsor) partners.

We’ve achieved so much in the game, and critically advanced the game significantly, usually at the forefront of all developments. The legendary list of Everton “firsts” are a true testament to our status in the game and should, in fact must be, part of our brand.

On the pitch, we have until recent times had periods of significant success which with more fortuitous timings may have created dynasties rather than short periods of glory. Historical events, much more important than football, critically cut short periods of success, two World Wars and of course the banning of English clubs in Europe. Nevertheless, they’re part of our history and as such are part of our branding – they are what makes Everton, Everton.

Apart from great teams we’ve been blessed with great individuals, Dean, Lawton, Sagar, TG Jones, “the Golden Vision”, Alan Ball, Neville Southall, Rooney (briefly) and perhaps even Lukaku – each adding colour to a rich tapestry of individuals, characters and some of the greatest players to ever play the game – all Everton players, all stars in their own right, but crucially, critically part of the fabric of Everton.

Our stadium is part of who we are – the greatest club stadium possibly in the world. Not the biggest, not currently the grandest, but throughout its history at least until the post Taylor Report days right at the top of the club game. First purpose built stadium with 4 stands, first with 4 double decker stands, the Archibald Leitch influence still present today, the semi circles behind the goals, the FIFA World Cup in 1966, the triple decker main stand built in 1970, a genuine cathedral to the religion of football witnessed by more than 74 million spectators who have passed through her turnstiles. That’s richness almost beyond words in branding terms because it tells a story, a story of 125 years of being one of the truly great theatres of the world’s most popular team game.

Yet for all that, having a past is not enough, and as Moshiri said “we’re not a museum, we must win things”. There’s not an Evertonian that would disagree of course and in branding terms this statement is critical. This I believe is our opportunity in branding and therefore commercial terms. We are rich in history (I’d argue the richest), have huge heritage, depth and complexity, yet critically we stand as a huge redevelopment opportunity.

We’re a development opportunity on and off the pitch. Therefore, the message to would-be sponsors is you are partnering a brand that has a rich, deep multi-faceted back story. We’re a club that has moved through the different times of footballing history, and at a time of huge interest in the game globally (albeit with many growth opportunities ahead of us) we’re poised for another period of development and success with all the commercial benefits that arise from it.

That must be the message to sponsors. With our past, our retained status, and now the investment on and off the field we are a unique branding proposition in the most attractive sporting billboard in the world.

We must sell our past because that is what we are, it is the good times and the bad that has made us what we are, and granted us the position we are in. Our position today and the new Moshiri ownership gives us the opportunity to take that platform to new levels of success and visibility in selling our future.

On top of all the brand qualities we offer, uniquely in my opinion, then visibility is the key to generating the largest revenues in the future. Manchester United for example, average 52 million views on global TV per game. In addition, they have over 600 million social media contacts – for a sponsor an absolute dream for which they pay the eye watering sums United benefit from. However, it’s not beyond the bounds of possibility that with the correct marketing and partnering we couldn’t grow to a similar level over the next decade or so.

My point is that yes, we have to create success on the pitch to enjoy similar commercial success, but, and I’d argue this very strongly, we can bridge the current commercial gaps through two factors. One is the richness of our brand and identity. We offer values as an institution that can seldom be found elsewhere in the footballing world. If a brand wishes to invest in football, there are few richer (in content) brands than Everton. The complexity of our past offers multiple brand associations and share values.

The second is the development opportunity, the opportunity to catch and pass our rivals.

I said in the podcast, a football club can be equated to a river, the river is ever present, yet the waters flow and change over time. I truly believe this is how Everton should be viewed and sold to our partners, even though football can be a quick changing sport, the opportunities for partners along the length of the river and in different conditions exist to be exploited.

The right partners are equally important to our brand. I’m a great believer in finding synergies between the host (Everton) and the sponsor. Equally it is important that the portfolio of sponsors see additional value from the association with co-sponsors. This shouldn’t be over looked in the slightest.

The choosing of sponsorship partners is critical, we must seek similar values and ambitions. If we do so both partners benefit together, and when it comes to future contracts we can demonstrate the success of previous relationships and price our participation accordingly.

As we’ve spoken about, we’ve a long way to go about maximising the opportunities ahead of, thus enabling the revenues to make us truly competitive. However, we have the key component in our brand for the reasons given above, all we need now is the enthusiasm and know how from those charged with selling us, to make sure it happens. That, under our current management remains a huge challenge, but (as with the football team) the addition of new, fresh, proven talent is eminently achievable.

We are a fantastic brand, unique in football, and ripe for development and the resulting monetisation for the benefit of the club and partners.


Do we have a transfer “war chest” this summer?

June 1, 2017

the esk

It’s the first day of Everton’s new financial year, and still I read that some supporters don’t believe we have any cash with which to buy the players Koeman and Walsh have identified. Rumours of ridiculously low bids “We must sell to buy”, “Moshiri is not the real thing” etc etc. It’s part of spring turning into summer, a seasonal right of passage, it’s part of being an Evertonian.

However, a reasonable projection of Everton’s financial performance last year, puts all these rumours to bed, forever (well at least, as long as the broadcasting revenues continue to pour into the Premier League.)

I’ve gone through the major financial events of the last year, transfers, player sales, contract increases and factoring in the enormous increase in revenues from broadcasting.

I’ve made a number of assumptions based on previous years’ accounts. I’ve also had to make assumptions on the cash flows surrounding players coming in and out (to simplify matters I’ve determined that all transfers are paid over two years, thus the cash flow arising from transfers is effectively half any surplus or negative balance.)

The reason for doing this is to demonstrate that we can comfortably afford a significant transfer budget without considering any major player sales (notably Lukaku or Barkley), nor any cash injections from Moshiri.

I must stress that these figures are my own projections, they’re not based on any information from within the club, but they do accurately reflect information in the public domain re transfers and contract values. Thus, they’re open to interpretation and I’m sure 20 similar projections from other so-minded fans will come up with different figures, but from my perspective they satisfy the basic question asked “Do we have transfer funds available this summer without selling?”

OK, here we go, I’m presenting last year’s accounts alongside my projections for 2016/17. From that we can estimate the probable cash position (assuming no major changes in credit policies re suppliers/broadcasters etc)

Estimated Profit & Loss Accounts 2016/17 £m

2015/16 Est. 2016/17
Broadcasting 82.50 130.00
Gate receipts 17.60 18.00
Sponsorship 9.30 11.90
Commercial 12.10 12.70
Turnover 121.50 172.60
Wages -84.00 -94.00
Operating expenses -30.40 -33.44
Expenses -114.40 -127.44
EBITDA 7.10 45.16
Exceptional items -11.30 -5.00
Player amortisation -22.40 -41.35
Depreciation -1.80 -2.00
Operating Profit -28.40 -3.19
Profit on player sales 7.80 55.30
Profit before interest & tax -20.60 52.11
Interest payable -3.70 0.00
Tax 0.00 0.00
Proft/(loss) before tax -24.30 52.11

So, what does that mean in cash terms?

At the end of May 2016 we had £2.8 m in cash. Moshiri repaired the balance sheet with an £80 million undated, interest free loan.

Debt was paid off, a sum of £58 m.

That leaves an increase in cash balances of £22 million.

The accounts suggest (with the qualifications above) that cash levels within the business will have increased by something between £60 and £70 million – using the assumptions mentioned above the figure is £68 million.

Thus, the club should be, prior to any additional exceptional expenditure (the figure already includes Koeman and Walsh’s acquisition costs), sitting on cash somewhere around the £90 million mark.

The one item of expense not considered is Bramley Moore dock. It has been reported that we will pay around £24 million for the acquisition of the land (prior to any stadium build costs). I’m going to suggest that money is “ring fenced” – sorry, I know that term has negative associations for many blues.

That leaves us with a cash balance of around £66 million.

Using a similar basis that transfer fees are paid over a couple of years, not all up-front then not even the most pessimistic Evertonian can deny that there are adequate funds within the club without resorting to selling players first.

The theoretical war chest should no longer be just theory, even using very large margins of error on my projections will still demonstrate there is cash in the club.

If we use the assumption that Barkley may be sold, and even if Lukaku’s valuation is not met, then the cash position becomes even rosier.

As mentioned previously, STCC should not present a limiting factor given the removal of non-core players from the wage bill and the likely player trading profits in this new financial year (2017/18)

The limiting factors in our transfer activities will be player’s desire to join us, and our ability to get the deals over the line.

It is most certainly not our cash position.

Outsourcing is costing Everton dear

May 28, 2017

the esk

In the second podcast of “Everton Business Matters” on The Blue Room Rodger Armstrong, John Blain and myself discussed the shirt sponsorship and launch. For those that listened to the podcast it was clear that none of us were overly impressed with the manner in which it was handled. The feedback from the show was similar also.

That got me thinking about why would an organisation like Everton perform in the manner it did?

Then the answer struck me, and it’s a fairly obvious one which I’m almost embarrassed to admit I didn’t think about when talking through the launch.

The fact is that there is no financial incentive to do anything other than what we’ve done.

Why would I say that? It’s the nature of the deal with Kitbag (now Fanatics) and Umbro. Through the outsourcing arrangement there’s no incentive to have the shirts available at the time of the launch, no incentive to have the kit available for the last home game of the season.

Not only does this create a poor customer and fan experience, it crucially impacts revenue, not only in the context of shirt and other kit sales, but in terms of the value of sponsorship arrangements.

Why would a premium brand pay top dollar in the knowledge that the outsourcing arrangements impact launch and follow on performance? Sponsors are obviously looking for greater exposure than just shirt sales, there’s the global television audience, media and print pictures, but also presence on the internet.

The outsourcing to Kitbag (now Fanatics) was done for a number of reasons. It de-risked the retailing arrangements for the club, allowed us not to have to carry stock, reduced premises and staffing costs and guaranteed a minimum level of income. At the time the deal was struck, these were all valuable benefits given the financial state of the club, preserving capital, reducing costs and guaranteeing income.

However today, and until the end of the contract in May 2019 we are paying the cost of the deal renewed in 2014, when arguably although pre-dating Moshiri we could have afforded to resume our own retailing arrangements.

The impact of our commercial income performance only becomes clear when it considered versus our competitors:

Commercial Revenues Financial Year 2015/16 (£m)

Manchester United £268,000,000
Manchester City £178,000,000
Chelsea £117,000,000
Liverpool £116,000,000
Arsenal £107,000,000
Tottenham Hotspur £60,000,000
Aston Villa £28,000,000
Newcastle United £25,000,000
West Ham United £22,000,000
Everton £21,000,000
Everton (Adjusted)* £28,400,000*

*The adjustment comes from adding back in gross revenues not accounted for because of outsourcing kit and catering, but also deducting £0.6 million which is the commercial element of broadcasting revenues. All other clubs include this in their broadcast revenues, we strip it out to bolster the commercial revenue performance.

 Now what I consider to be our peer group are self-evidently miles ahead of us in generating commercial revenues.

Our closest rival financially among the top 7 is Tottenham Hotspur and it staggers me that they are generating commercial revenues over twice our adjusted figure. Of course, being in London helps, but it’s not just geography, as Liverpool and the two Manchester clubs demonstrate.

The biggest concern is that the Tottenham figure is before they move to their new stadium in 2018/19, and the end of their current shirt sponsorship deal in  2019. (Update – Spurs have signed a multi-year sponsorship deal worth £25m a year with Nike)

Our stadium move (and corresponding match day and commercial revenue increases) is several years behind Tottenham’s and not likely to be before 2020/21 at the very earliest.

So how do we go about bridging the current £31.4 million gap between ourselves and Tottenham. The question is important because match day income is unlikely to increase significantly barring major cup runs at home and in Europe, and broadcasting revenues will only increase if we leap frog our rivals into a higher league place.

Firstly, the stuff we already know about.

The shirt sponsor deal with SportPesa and the USM Finch Farm naming rights deal works out at £15m (using Robert Elstone’s figures from the GM). That’s an increase of £9.7m per annum on the previous Chang deal.

Other partnerships. Although no figures have been given the Everton/Sure relationship is thought to be worth around £1m a year. Is it reasonable to think we can add a couple more similar arrangements? (Update – we know have Blackwell Global as a new partner)

The impact of European football is important. The 2015/16 commercial revenue figure fell by nearly £6m compared to the 2014/15 figure, the reason given being the absence of European football. With the higher value of new deals perhaps we can see further enhanced revenues in 2017/18, but let’s say somewhere between £6-8 million.

So, there’s an extra £18 million in commercial revenues which using the non-outsourced revenue figure reduces the commercial revenue gap considerably, but we would still be £13.5 million short of Tottenham. (Up-date £28m short following the Spurs Nike deal)

The only answer to bridging the gap further is in the retailing and kit supply deals currently set to run until the end of May 2019.

Several clubs have broken existing deals, notably Chelsea, in order to sign new more lucrative contracts. Of course, there is a cost to this, Chelsea broke their then existing deal with Adidas 6 years early to sign a 15 year £900 million deal with Nike.

Now we’re not in that league, but the paltry deal we have with Umbro is thought to be worth a maximum of £6 million a year, and with only two years to run must be ripe for review at least at the end of next season? (Tottenham receive £10m a year from Under Armour, Liverpool £24m from New Balance, Arsenal £34m from Puma, Manchester United £75m from Adidas)

Let’s assume we break the Fanatics and Umbro deal a year early, yes there’s a one-off cost which is treated as an exceptional item, but relative to the benefits it must be considered surely?

The benefits would be ability to control own sales, run own campaigns and massively increase the distribution base for kit sales at a time when our profile should be rising strongly on the back of European football, continued advances in our league position, and the publicity and excitement surrounding the (by then) impending move to Bramley Moore Dock.

It should mean an end to the farce that was the launch of our 2017 kit and new sponsors.

Realistically the only way to bridge the commercial gap between us and our next commercial rival is to bring retail activities back in house and seek an improved deal with a shirt manufacturer on the back of our much improved and increased profile.

We’ve a year to sort it out given next season’s arrangements are in place, in my opinion it should be a major priority for the club and board.

Usmanov bid does not make move to Everton more likely, in fact the reverse

May 20, 2017

the esk

There seems to be as much interest in Alisha Usmanov and his activities by Everton fans as there are by Arsenal fans these days. Perhaps given the link between Moshiri and Usmanov, and the USM sponsorship of Finch Farm that is understandable.


The late breaking news of yesterday (Friday 19th May) that Usmanov had tabled a bid for Kroenke’s shares at Arsenal has of course, re-ignited interest. Therefore (for what they are worth) I’ve penned my latest thoughts on the matter.

I don’t believe for a second that this changes the prospects of Usmanov divesting himself of his Arsenal shares and pitching up on the banks of the Royal Blue Mersey. Let me explain why.

His bid can be viewed in several different lights.

It can be considered as warning shot across the bows of Kroenke and the board in the sense that it highlights the difference of approach between himself and Kroenke, it puts pressure on Kroenke to respond, and perhaps to act following the FA Cup Final. The act may well be to remove Wenger from the manager’s position, either by moving him to a director of football role, or by leaving the club altogether.

Given the lack of influence Usmanov has, a bid, subsequently leaked to the press, may be his only way of applying pressure on Kroenke.

The bid itself is interesting in terms of where it is pitched. On the face of it, and as reported by most of the press it shows a healthy premium to the current share price. Based on the closing price last night, the market values Arsenal at £1.13bn, Usmanov’s bid values Arsenal at £1.54bn. Usmanov is offering a 36% premium on the quoted price (very close to the premium he paid Moshiri for his shares).

However, the market undervalues Arsenal. Using the Markham multivariate model, Arsenal on 2016 figures is worth £1.37bn. However, on estimated figures for 2016/17 Arsenal is worth more than £1.67bn, reflected by increased broadcasting revenues and higher profitability. Of course, the accounts next year may take a hit through the absence of Champions League football, but that would be viewed as temporary and partially offset by the large increases in Europa League payments.

Thus, it’s a fair argument to suggest that the “bid” is nothing more than an exercise in putting Kroenke in a more difficult position, and forcing change at the end of a disappointing season (for them).

Alternatively, it may be a low ball bid to gauge the response of Kroenke, a means of testing the waters. Whatever the response is from the Kroenke camp privately would indicate one of two things – “no, we’re not selling at all”, or “no, not at this valuation”. If it’s the latter, then the onus is on Usmanov to up his bid significantly.

There’s talk of two other potential bidders, unnamed currently although I suspect one may be the Nigerian billionaire Dangote. Other bidders entering the fray would be interesting, but until such time as there is concrete evidence of such, in my opinion they’re not hugely relevant.

The reason there’s such interest in the goings on at Arsenal of course, stem from the idea that actually Usmanov’s real interests lay in getting out of Arsenal and joining his business partner Moshiri.

Many are speculating that this bid news, when it fails, will be the last straw and result in Usmanov selling up. As I’ve spoken about at length, this is not easily achieved even if he wished to do so (which I obviously don’t believe to be the case).

Selling after a failed bid (even if the bid was not necessarily a serious one) is a strange tactic. Most very successful investors only ever sell voluntarily from a position of strength, not perceived weakness. I would stress again if it was Usmanov’s intention to sell his holding I doubt he would attempt a bid most likely destined to fail before selling his holdings. He would be doing his utmost to extol the virtues of an Arsenal holding, not demonstrating his dissatisfaction with the majority owner.

Thus, to conclude, from my own perspective, whilst the news is interesting and what follows in terms of changes at Arsenal (if any) by Kroenke will be carefully watched, it only further confirms that Usmanov’s interests remain at Arsenal, either as a 30% shareholder in an improved company (by result of changes in Wenger’s position) forced by the pressure of a bid, or he becomes the outright owner as the result of finding a valuation acceptable to Kroenke.

The latter I find highly unlikely, the best Usmanov can hope for is management change, and the gratitude of those Arsenal fans no longer supporting Wenger.

For Everton, we’re entering the most important summer perhaps of our existence, were we either prove ourselves to be an attractive sought after side by those players we wish to recruit or not, plus continued advances off the pitch with further stadium related news.

It should also be considered there’s nothing in the proposed  Bramley Moore stadium funding structure that demonstrates the expected arrival of another multi-billionaire into the club any time soon in fact quite the reverse.

That’s what is going to maintain our interest through the summer, not the impending arrival of Usmanov, which in my opinion has never been on the cards, and is further evidenced by yesterday’s news.