Significant corporate or financial news released in and around a key holiday period, particularly Christmas, can often be viewed with some cynicism. It is, as is often stated, a good time to bury news, particularly if the content is not overly time sensitive.

On many occasions in the past the Everton boards under previous ownership have engaged in similar practices. It was therefore somewhat surprising that the directors of Everton Football Club, under the ownership of Roundhouse Capital Holdings, would inform Everton shareholders of the necessary steps the company would take to pay a proposed dividend to shareholders.

To create balance, I wrote positively about the capital reduction – the reduction in the share premium account in return for removing the accumulated deficit in the profit and loss account – built up over many years of operational and financial mismanagement. That article, written on Christmas Eve can be read here

I followed that up with the letter sent to shareholders of Everton Football Club Company, Limited here

Now that the holiday period is over, the proposal to pay a dividend resulting from some or all of the proceeds of the sale of the women’s football operation (EFCW Holdings) from Everton to Roundhouse Capital is worthy of some consideration.

The indication is that the dividend will be in “the region of £20 per share”.  Everton have 2,198,935 ordinary shares in issue. The proposed dividend will therefore reduce Everton’s cash balances by £43.98 million. The vast bulk of that will be paid to Roundhouse Capital (99.7%).

Two fundamental questions arise. (i) given Everton’s recruitment requirements in this January window is this a wise use of cash? and (ii) what does it say about Roundhouse Capital’s future investment policies regarding Everton?

I acknowledge fully the excellent capital restructuring that had occurred in the 12 months since the Friedkins acquisition of Everton. But the fact remains that there is a relatively substantial long term debt secured against the stadium of £350 million and that the playing squad is in dire need of the maximum levels of investment football’s financial regulations can allow. Additionally, one might argue that significant investment is required within the club’s academy – an area that takes on even greater significance under the new squad ratio regulations.

None of the above is consistent with a distribution of cash in the form of dividends.

Secondly, and perhaps more importantly, what does this dividend payment say about the future investment strategy of Roundhouse Capital with regards to Everton?

It has been speculated that the Friedkins are interested in further land acquisition around the site of the Hill Dickinson stadium and future income generative development, particularly on the water-filled Nelson Dock to the South of the stadium.. That being the case, is a dividend payment an appropriate use of the company’s cash?

Personally, I believe that these are questions that require answers. As I have stated previously, communications from the Friedkins and from the Everton board have been limited and when communications have occured, rather vague beyond the usual expectations of greater competitiveness in the future.

The Friedkins, either directly or through Roundhouse Capital or its minority investors, Christopher Sarofim and Jason Kidd, have never made clear their intent.

The release of news of their intent to pay a dividend so early into their ownership and with so much capital investment still required at Everton raises a concern – in my opinion.

There may be a perfectly reasonable explanation, and I stress the club now has sound finances and professional ownership and management, but this proposed dividend payment is not what might be reasonably expected.

In my opinion, we deserve and require a greater explanation as to why this is a priority over more obvious future investment requirements by the club.