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

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.

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

  1. Happy to take the figures you offer as a reasonable summary, give or take a million or two here and there… as you say right at the end, it’s the ability to bring deals to a successful conclusion that poses the main threat.

    I think it’s safe to assume that the manager and DoF drew up a list of potential target signings to present to the board/Mr.Moshiri, together with a list of the current playing staff who they would not stand in the way of leaving.

    So if we assume a few departures, not including large price tag players like Barkley and Lukaku, the potential £66 million could be boosted by a conservative additional £10 million plus.

    So, let’s say circa £75 million in ‘liquid’ cash and a well-defined shopping list was moreorless agreed as of the end of the 3-1 loss at Arsenal… and as we sit here, there is no apparent definite news on player deals in the offing.

    I respect the fact that the club will want to keep their cards close to their chests, but the ‘new Everton’ needs to be bold and move much, much quicker than in previous transfer windows.

    Fortune favours the brave and now we have some decent finance available to spend on strengthening the squad, let’s get a move on.

    It is to be hoped that whoever is headlining the negotiations with players and their agents is not prevaricating, but getting to the bottom line as quickly as possible.

    If a deal looks highly likely to collapse, then move on to the next.

    Trying to resuscitate a corpse is pointless… find a ‘live one’ and get to work again.

    Too many times, we’ve said things like “it’s our most critical and important transfer window” so we’re all getting tired of that rhetoric, it’s almost as banal as “strong and stable” coming from you know who in you know where.

    Take the shopping list and act on it… stop messing around Everton, show the players, the agents, the other clubs, the media and most of all, our own fans that we mean business.

    It’s high time we were NSNO again !!!!

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    • I think you are wrong when you say that there was cash of £2.8 million shown as cash on hand for I think that was a minus figure or put another way an overdraft of £2.8 million.Thats effectively just under £6 million difference
      The £80 million investment paid off debts of £54 million the balance as per the accounts, was used to settle exceptional items. There is unlikely to have been any cash left over from that £80 million

      The wages and related employment costs will almost certainly will have risen by over £10 million my guess it’s more like £15 million.
      The player trading profit is likely to be closer to £40 million than the sum you are suggesting
      As for cash balance I think you are grossly exaggerating what that will be
      On the basis of receiving all John Stones money’s front , which is possible and indeed the extra TV money at most that would amount to £80 million the growth in commercial and indeed sponship money is minimal it is unknown at this point if Everton have moved from paying for players by Instalments but let’s assume theyhaven’t so my best guess is that around £25 million will have to be found to pay the first sums due for the likes of Bolasie and Schdelin.
      Time of course will tell but whilst it’s quite possible you are being optimistic it’s just as possible I am being pessimistic that means I tend to think the cash available,unless another injection is made from the shareholders , means that the bulk of any player trading funds will be coming from sales

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