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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.