Everton record loss – better days ahead?
Posted on January 17, 2020
EVERTON’S pursuit of success isn’t working at the moment as evidenced by their financials for 2018-19. The club recently appointed one of European football’s most successful managers, Carlo Ancelotti, prompting great enthusiasm and hope that Everton can turn the corner. But the announcement of their financial performance, coming just after a Liverpool second string side knocked the Toffees out of the FA Cup, has really given Everton fans a dose of reality. There’s a lot of hard work to be done if Ancelotti is to fulfil his ambition of making Everton into a Champions League club.
Everton made a record loss of £ 111 million in 2018-19, a reflection of the club’s spending spree over two seasons, a strategy that has yet to bear fruit. It doesn’t help that across Stanley Park, Liverpool are in full flow, comfortably leading the Premier League and still going strong in the UEFA Champions League, the competition they won in 2018-19. The difference between the two clubs is captured by their revenue streams – Everton’s £ 188 million represents just 35% of Liverpool’s £ 533 million.
Everton’s income was more or less on par with 2017-18. Broadcasting contributed 70% of total income, a very high percentage even by Premier League standards. Liverpool, for example, derive around 49% of income from TV. Everton’s revenues from matchday (£ 14 million) and commercial activities (£ 41 million) both declined. Although the average attendance at Goodison Park for league games was 39,043 (98.66% full), the lack of European football was a key element in the drop in revenues. One statistic that should concern Everton fans is the wage-to-income ratio, which has grown to 85% (2018 – 77%). Wages totalled £160 million for the season.
In two successive seasons, Everton have spent over £ 100 million on new players, many of whom have yet to fulfil their true potential. They have been unfortunate with injuries, but others such as Moise Kean from Juventus (£ 25 million) and Alex Iwobi (£ 28 million) have not settled especially well. Their biggest influx of players came in 2017-18, notably goalkeeper Jordan Pickford (Sunderland, £ 25 million – arguably the most consistent of all the new signings), Gylfi Sigurdsson (Swansea, £ 40 million) and Theo Walcott (Arsenal, £ 20 million).
The investment made in the playing squad resulted in an amortisation charge of £ 95.1 million, almost £ 30 million higher than 2017-18. In the past, the club has offset this cost by player sales, but in 2018-19, this amounted to little more than £ 20 million.
Everton have also been through a few managers in recent years. Marco Silva was sacked earlier this season after around 18 months in the job and a win rate of just 40%. His predecessor, Sam Allardyce, was hired in November 2017 but lasted six months (win rate 38.5%) as the club didn’t like his style of play. Ancelotti is the highest profile manager the club has had in decades, but it will be interesting to see how the published financials affect his transfer window. The club’s director of football, Marcel Brands, hinted that signings like Wilfried Zaha of Crystal Palace were currently beyond the club’s reach.
The extent of the club’s loss may ring some alarm bells around Financial Fair Play, as the three-year loss limit permitted is £ 105 million. Everton made a profit of £ 30.6 million in 2017 and has lost £ 13.1 million and £ 111.8 million in 2018 and 2019 respectively. It’s close, but Everton should avoid any punishment from UEFA. They certainly cannot afford another poor return in 2020.
More positively, Everton reduced their debts to £ 9.2 million (from £ 66 million). The club’s majority owner, Farhad Moshiri, has poured in another £ 50 million, taking his personal investment to £ 350 million on top of the £ 200 million he initially laid-out.
The club’s new stadium at the Bramley-Moore Dock promises a better future for Everton. They are poised to get the funding for the project from US bank JP Morgan and Japan’s Mitsubishi UFG. Furthermore, USM Holdings, part-owned by Moshiri and Alisher Usmanov, have paid £ 30 million for first refusal on the new stadium’s naming rights. While some fans are not happy about leaving Goodison, the club’s prospects really depend on the move to a new, bigger ground that can make them more competitive and also offer greater commercial opportunities.
There’s no doubt Everton have not had a good return on investment. The club had the seventh highest wage bill in the Premier League last season but Farhad’s money has not been spent wisely and that’s not necessarily been anything to do with the team manager. Going forward, much will surely depend on the dynamic between Ancelotti and the club’s director of football.
The club’s owner will be demanding a better performance on and off the field, Ancelotti would not have come cheap, but that big loss may compromise some of the new manager’s plans. Success is long overdue. This is, after all, a club that has not won a single prize since they lifted the FA Cup 25 years ago, the longest period without a trophy in their history.