It has been commonly accepted by almost all parties that since the start of the Premier League Everton’s financial performance has lagged that of its one-time peers.

Before doing the research I would never have believed the extent to which the lag has created a situation that is almost inconceivable to bridge in the future.

I started by looking at the changes in the size of balance sheets of the 6 clubs ever present in the Premier League plus that of Manchester City.  This would reflect the economic progress of each club over the booming Premier League times. The results were as follows:

Change in balance sheets 1992/93 to 2016 (in £000’s)

So how are such variances created?

There are a number of factors – the amount of capital put into the club, the amount of debt taken, the levels of turnover and expenses and the resulting retained profit or loss position.

The balance sheet grows from investment in the form of capital, debt, or accumulated profits. As will be seen each of our “peers” have benefited from each of the above over the last 20 odd years with the exception of Everton.

Depending upon the owner, different clubs have benefited from injections of capital or the provision of debt. Both have been used to develop infra-structure (stadium) and most critically of course investment in playing squads over many years.

Most would prefer to use debt or inter-company debt as the means of funding expansion, however financial fair play rules has seen owners effectively create equity rather than debt.

Manchester City for example in 1992 had £778,776 of “called up share capital”. As of the end of 2016 that had grown to an unbelievable £1.258 bn as Sheikh Mansour funded both the expansion of Manchester City and the accumulated losses of more than £670m with equity.

Chelsea with accumulated losses of nearly £770 million, on the other hand have gone down the route of inter company debt with their parent company owed in excess of £1bn.

Both clubs of course, are at the extreme funding range by virtue of their respective owners access to and willingness to provide capital.

Profitability

In the absence of  a State backed or incredibly wealthy and generous owner, retained earnings obviously impact the size and strength of a company’s balance sheet. The difference in profit performance of each of the clubs is quite staggering and tells you an enormous amount about the way the clubs are run and funded (to 2016):

Both North London clubs have operated profitably, notably of course, Arsenal under the stewardship of Arsene Wenger. Liverpool on the other hand show significant accumulated losses most of which occurred under and immediately after the Hicks & Gillett ownership with losses amounting to £174 million from 2008 to 2013.

Manchester United’s aggregate profitability is surprisingly low at just £7m, however operationally and in terms of cash generation is enormous, the aggregate figure is severely impacted by the huge interest payments made by the club since the Glazer acquisition. The Glazer business model of huge leverage and focusing on success on the pitch plus maximising every commercial opportunity by employing high achieving business executives has been hugely successful in financial terms. Fans of course have paid a very heavy price in terms of ticketing pricing but the rewards for both shareholders and on the pitch have been there for all to see.

One of the key indicators for me is to look at the amount of cash each club has generated and from the underlying sources. The Premier league have been spectacularly successful in selling their media rights but that is only part of the story, at least for the commercially successful clubs.

Total turnover in Premier League era & source of income £’000s to end of 2016

So the chart above shows the total turnover of each club in £’000s since 1992 to 2016 ranging from Manchester United at over £4bn to Everton at £1.3bn. I stripped out the Premier League broadcasting and merit payments to see how each club has generated other income. This other income includes commercial, sponsorship, match day and European revenues.

The differences are startling with even the next worst performing club Tottenham generating nearly £600 m more in non TV revenues than ourselves. As we go further up the table the disparities grow even greater. The most concerning aspect of all this is that the gap will continue to grow even greater as the clubs above generate much, much greater income than ourselves.

Unsurprisingly given the above we have the greatest reliance historically, and going forward even more so, on Premier League TV rights. It also means that we are very sensitive financially to final league position.

The difference in non TV income is the biggest indictment of our failure to take the commercial opportunities the Premier League has presented.

The growth of income at Everton is our greatest off field challenge. We have to firstly stop the gap between ourselves and those above continuing to increase. We are limited in terms of match day income obviously until the arrival of the new stadium at Bramley Moore, however commercial and sponsorship income growth is very achievable. The creation and recruitment of a commercial team willing and able to exploit the huge commercial opportunities globally is critical.

Most of the above is of course, to most Evertonians hardly fresh news. However the scale of our under performance perhaps is. More importantly is the understanding that the majority of those that put us in this position are not the right people to extract us from the appalling relative position we find ourselves in.

These figures are pre Moshiri. His immediate priority on arrival was to repair the balance sheet by removing external debt and providing additional working capital. He did that through his original unsecured loan of £80 million, and the forthcoming accounts will inform us if he extended this facility in January of 2017 as is suspected by some.

Regardless, the new accounts will show we do not have the resources or the people to compete at the top. Whilst progress towards Bramley Moore in 2021/22 will be extremely welcome, much more needs to be done immediately to improve our finances.

More of the same in terms of personnel and existing commercial arrangements will not do any longer (they haven’t for years as the figures show). They will continue to make us even less competitive than we are now. The window is narrowing all the time and it is only Moshiri who can deliver the changes that are necessary to allow us to squeeze onto the top table.

Otherwise the opportunity will have gone for ever. That is the stark reality.

NSNO.