Business and South Africa’s International RelationsApril 11, 2023
Uncommon Sense from the IMF?April 18, 2023
An article written by Ian Kilbride
Everton is many things to many people, but as the late great England world cup winner Alan Ball once said, “Once Everton has touched you, nothing will be the same.” Derived from the Saxon word ‘eofor’, meaning wild boar that lives in the forests, (which is no reflection on its style of football or its supporters) Everton’s first mention in official records dates from 1094, when William the Conqueror gifted the area to his loyal cousin Roger de Poictiers. In 1664 Royalist leader, Prince Rupert, launched his attack on the Liverpool town dwellers from the Everton brow, resulting in the deaths of 360 defenders. Everton have been launching attacks on Liverpool defenders for over 130 years now, but with far fewer injuries and mixed success.
Paradoxically, although established in 1878 and one of the original football league founders in 1888, Everton Football Club has never been located in the district bearing its name. A little-known fact is that Everton’s first games were played on a corner of Stanley Park until moving to a new venue, Anfield and then setting up its current home, Goodison Park in 1892.
Once known as the Merseyside Millionaires, Everton has racked up an enviable record of firsts in English professional football. Notable among these is that Everton was the first football club to construct a purpose-built stadium. The current ‘grand old lady’ of Goodison Park is on her final facelift before the club moves to its new stadium in the Bramley Moore dock for the opening of the 2024/25 season. Of course, historically, when all else failed on the pitch, Everton could turn to a higher power, as it was the first club to have a church attached to its stadium. Its footballing record is also remarkable. The Toffees are the first club to have played 4,000 topflight games, amassed 5,000 league points and played 100 seasons in the topflight of football. All this while being located in one of England’s most deprived and truly working-class districts.
Yet today, this revered and idolised club is not only facing relegation, but financial ruin. Relegation battles for survival are nothing new to the club since its bare-knuckled come from behind victory against Wimbledon (where are they now?) on the final day of the 1994 season. The club has skirted relegation on at least two occasions since then, including last year, but this year the sentiment and narrative have darkened further. This is borne out by the club’s 2021/2022 annual report, which makes for sobering reading.
The financials report a decline in turnover of £181 million from the previous year’s £193 million, largely as a result of lower broadcasting revenue. But as broadcasting revenues are linked directly to league performance, the club’s poor performance on the pitch has had a highly material impact on turnover. The operating loss for the year (before player trading) amounted to £24,5 million, with crystalised losses of some £90,4 million. After player trading, management changes, interest and taxation, Everton reported an annual loss of £44,7 million. While eye-watering, this figure pales when measured against the previous year’s loss of £121 million!
Gate receipts remained buoyant (thanks to the club’s uniquely loyal fan base), but this too is a lost revenue opportunity given the club’s poor performance in all other competitions and, of course, no European football. While the club’s commercial revenues remained flat, its balance sheet is now weaker given the drop in value of its ‘intangible assets’ (players) from £148,7 million from the previous year’s £209,7 million. Russia’s invasion of Ukraine had a direct impact on the Blues when its major commercial backer, Uzbek-Russian oligarch, Alisher Usmanov, was sanctioned and forced to divest his interests in the club. Unlike Chelsea, Everton simply chose the wrong Russian oligarch at the wrong time in history.
But the really alarming part is the commentary from the club’s auditors, which highlights the risks to the club as a going concern. The auditors’ note:
MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
We draw attention to note 1c in the financial statements, which indicates that should the club be relegated, it will require additional financial support from its majority shareholder, who themselves are reliant on support from their majority shareholder, who have indicated they are supportive of the group, but the support is not legally or contractually binding. These matters indicate that a material uncertainty exists that may cast significant doubt over the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
So here we have it, one of England’s, and indeed the world’s, greatest and most historic clubs is facing not just relegation, but financial ruin. Despite the avowed support of Manx-based Blue Horizon Investments (which owns 94.1 percent of the club), there is even a suggestion that the club will have to sell its (yet to be completed) Bramley Moore stadium and lease it back from the owners, simply to continue operating. And while generations of loyal Blues from all parts of the world look on at the horror show unfolding before us, the well-meaning and true-blue Everton board appears unable to steer this once magnificent ship away from striking the iceberg lurking just a few short games away.
As if this were not enough, at the end of March, the Premier League referred Everton to an independent commission for an alleged breach of the league’s profit and sustainability rules during the 2021/22 season. Although robustly contested by the Everton board, if the club is found to have breached the rules, the penalties imposed could be financial and a deduction of points – effectively condemning the Blues to relegation.
Everton Chairman and lifetime Evertonian, Bill Kenwright, laments in the club’s annual report, “Memories of occasions like these has (sic) made the recent instruction given to myself and my fellow board members not to attend Goodison Park all the more painful. That has hurt deeply.”
While this must count as the only Chairman of a PLC to express his personal hurt in an annual report and says much about the conflation of ego, club and company, the current hurt will be nothing compared to that of relegation and financial ruin.