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Thoughts from the Editor

We're Broke
9 July 2004

The Future of Everton: stay or go...

Everton Football Club Co Ltd is a £43M in debt — minimum.  (That from the mouth of William Kenwright, OBE, Chairman of the Board of Directors, to ESCALA; Saturday 3 July 2004.)  £30M of that is wrapped up in securitization courtesy of Bear Stearns, leveraged against the collateral of future season-ticket sales, with a handsome interest rate, massive annual payments, and a swinging penalty for early pay-off. 

The real number for total indebtedness of the Club is possibly as high as £60M if you factor in other liabilities, future commitments (eg, deferred transfer fees), and projected losses for the upcoming and increasingly dreaded 2004-05 season.  Everton are effectively broke.

Some capacity for new player's salaries may have been created with the departure of outgoing players who's contracts expired in June, releasing perhaps £70k per week in cash.  More may be imminent if the trend for turning down increasingly desperate contract offers continues!   Marcus Bent (rumoured to be on £13k pw) and Wayne Rooney (if he signs takes up to accept the offer of £50k pw) will eat most of that, leaving possibly enough in the salary pool for one decent player (but remember: we are losing money; the directors may prefer to bank the saving... ).

We had a 'small amount' in the kitty — perhaps £2M if one was being optimistic.  But that probably represents the remaining monies to maximize the agreed operating overdraft with the bank.  There is no £7M transfer kitty; there never was.  Kenwright told ESCLA that the bold bid for Alan Smith was to be funded with staged payments from Moyes's limited transfer fund, along with proceeds from the sale of two players.  If we are lucky, we can afford one more half-decent European or Division One player; that's it.

Of course, if we bank transfer cash and unpaid wages following the threatened departure of Gravesen, Radzinski and Linderoth, then the manager can possibly replace them... if he gets the money — not a foregone conclusion, given the debt and ongoing trading losses.

Without True Blue Holdings accepting that they have to allow fresh investment in to the Club, and without a Rights Issue of shares that the long-suffering fans could invest in (would they even be interested at this point, one wonders?) we can only raise cash in one way... and even then the manager is unlikely to see the bulk of it.

All the fantasy football projections from fans searching for their own secret solutions is wearisome and the 'we've missed out on...' stuff is misguided or just plain naive — we're not bidding for these players because we cannot... there isn't the cash.  So what's happening behind the scenes to change this dreadful situation?

Well, we've appointed Trevor Birch, ditching the universally maligned Dunford and pushing Sir Phillip gently aside.  Birch is a competent CEO — with a mission.  Kenwright does love the club and is certainly motivated; they both know that Rooney is cash in bank, stay or go.  And we are seeing some signs of life commercially with Andy Hosie (and with Paul Gregg now more hands on).  However, without significant fresh investment, we are in serious short-term trouble.  It is in this context that the stadium sharing option starts to make sense.  Yes, it has all sorts of emotional negatives but right now we don't really have any other options.  We are reduced to beggars, and it is our only currently affordable choice.

We now cling to the faint hope that, if we retain Our Kid, someone out there may be the sugar daddy investor who will take a punt on us and change the financial dynamic... but right now the best we'll see is stabilization at current debt levels; virtual stagnation in terms of squad development this season; and perhaps some very gradual progress over the next 2 to 3 years.

Staying in The Premiership this season will be a huge achievement... and that has to be the most depressing thought for a Cub of this stature, heritage, and history, with the fanbase we have — who have suffered so much for so long, with tantalizingly brief lights that appear at the end of the tunnel... only to be revealed as massive freight trains smashing into us again and again.   

How has this parlous state come about?  The reasons, it seems are many.  Take ticket prices: Everton have had the cheapest tickets for a long time, a reflection of the low-income area where the Club resides, perhaps?  More a conscious and admirable (if ultimately misguided) decision to keep the game accessible to the Common Man.  And yet, at the other extreme, we maintain the trappings of privilege (the Director's Car Park!), and we are paying around £35k a week to the likes of Campbell and Ferguson — salaries that are now totally laughable, if it wasn't enough to make you weep.  The ticket price hike this season was absolutely necessary — indeed., long overdue.  But the reaction to Dunford's arrogant introduction of the new pricing is set to reduced sales and thus neutralize any income benefit.

We've hired managers with pedigree or promise, at substantial cost, plus compensation and paying off contracts, but they have achieved little... or a lot if you believe that, without their inhuman efforts, we would have sunk without trace some seasons ago.  And our TV revenues have fallen as we've not been on TV as much in the last 18 months, even with the presence of Rooney.  Perhaps, if we can keep him, our TV exposure will increase, which will bring in some much needed funding, but it's a drop in the ocean.

The Board's willful insistence that the King's Dock fantasy was going ahead when everyone knew it was a dead duck cost us a few unnecessary millions, especially as it was apparent to anyone with half a brain that we had no visible means of coming up with the money, unless it was to be magically donated by Paul Gregg, from his personal piggy bank.  Why wasn't the money sorted at the beginning of that ultimately futile process?  Whatever the recriminations, it is the Kings Dock fiasco which leads us directly to the current state of poverty, where we must ask with charity for a deal with the red devils in order to merely survive and have any hope of an ascendant future.

What is needed now without a doubt is wholesale change within the Club.  Bill Kenwright, no matter what a wonderful fan he is, has presided over a continuing litany of decline, doing too little (an way too late) to change the stagnant and moribund hierarchy, the arcane structures of privilege within the Club.  Yet it seems doubtful that Birch's remit includes anything more than cosmetic changes designed to perpetuate the current control of True Blue Holdings while their dismal record demonstrate that they simply can't hack it. 

There... that's made you all deliriously happy, hasn't it!  You know where to send the dismissive feedback and the derisory e.mails. 

Michael Kenrick
(with acknowledgements to Neil Wolstenholme and Kenny Fogarty)

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