Everton's Blueprint For Oblivion
Everton may have a glorious history but today it is a club in crisis; a crisis that transcends their indifferent performances this season and one that the media had largely failed to uncover until a group of Evertonians released details of a summer meeting with Chairman Bill Kenwright. The meeting exposed, amongst other things, a truly appalling financial situation, an inability to explain £23m of annual expenditure and a shocking admission that Kenwright was prepared to sell the club to a fraudster living in a one bedroom flat in the Far East.
Everton's 2010 accounts were generally accepted as the benchmark for a club living within its means. Whilst some fans of the club thought differently, most journalists were unable to see past the carefully worded press releases which described the figures as “healthy” and “robust” despite record debt and wage increases that resulted in a pre-tax loss of £3.1m. In February a largely comatose mainstream media unquestioningly reported the chief executive's dismissal of a looming financial crisis as “the agenda of a small minority of fans who seem intent on painting only the bleakest picture”.
Everton's problem isn't their level of debt, £45m; it's their persistent failure to generate sufficient revenue to meet the financial demands of a competitive Premiership club. The fans' contention remains that the root cause of this problem lies in their board's chronic inability to deliver any semblance of a cohesive business plan. First they failed to invest in their stadium infrastructure, now it's the squad; the next fear is that they will sell the club to yet another unsuitable owner.
The chairman has been dismissive of Everton fans' opinions for a long time. Three years ago, when concerns were raised over what was seen as the inevitable failure of Everton's chosen business model, the fans were assured that the club's team of experts wouldn't allow such a failure to happen yet it's failed exactly how the fans had predicted: the banks are in control and the manager has been left penniless.
Everton were also dismissive of these same fans when they objected to Bill Kenwright's plan to relocate the club to a stadium nine miles from the city centre. The objections were well founded; as predicted by the fans a Government inquiry rejected the planning application as inappropriate and described the finances surrounding the scheme as questionable. Liverpool City Council went further, officially describing the application as a con!
The popular image of Chairman Bill Kenwright is that of a well known raconteur, an entertaining prevaricator who's the self proclaimed greatest Evertonian on the planet. In Liverpool the colloquialism used is “he's a bit of a Tom Pepper” but hardcore match-going Evertonians prefer to measure him by his results rather than his persona.
In 1999 Kenwright secured control of Everton through the consortium True Blue Holdings. Initially their £21m takeover was widely welcomed, but the subsequent inability of the board to invest or more importantly increase commercial revenue has seen the club stumble from one crisis to another, all of which have been resolved though additional loans or the sale of assets.
Kenwright's tenure appears to be a blueprint for oblivion. Over £50m wiped off the balance sheet; two failed ground moves (one to an iconic location the other to a supermarket car park); too many failed attempts to bring investment to the club; boardroom infighting, not to mention preventing angry shareholders from questioning the board through banning general meetings. Add to this ostracising the the local media when they dare to report the truth and conspiring to act against the fan base (confirmed in a series of leaked emails which recently cost a senior executive his job). Then, last but not least, the massive and mysterious £11m per annum increase in operating costs since 2007, which has been attributed to additional costs at the their new state of the art £1.1m per annum leased training ground. The many explanations for this have only served to increase suspicion that all is not what it seems at Goodison Park, particularly regarding the ownership which more and more people are questioning due to the presence of offshore companies and the ubiquitous Sir Philip Green.
Like some modern day Faustian pact Everton has literally sold their soul to remain solvent. All their assets have been either sold or mortgaged: this includes their stadium, which acts as security for a £30m loan; their future season ticket sales, the method by which the loan is repaid; and their ability to generate future commercial income as they have uniquely sold the rights to both their catering and merchandising operations.
Of course, it is the lack of success on the pitch that is the most painful for Evertonians: not one trophy in the cabinet since Kenwright gained control and none likely to come under this administration. Kenwright's dream has become a nightmare, his tenure is at an end and his only option is to find a buyer, but therein lies the problem.
Many believe Kenwright's dream was financed by Sir Philip Green as Kenwright openly admits to acting on business advice from Green, the very definition of a shadow director, yet the ultimate source of the finance behind his 26% shareholding remains a mystery. What isn't a mystery is the source of the finance behind fellow director Robert Earl's 23% shareholding, which is in the ownership of the offshore company BCR Sports; in 2008 Paul Gregg, former director and previous owner of these 8,146 shares, informed the fans that Green had paid him for these shares.
Combined with the well publicised concerns of the previous CEO, Keith Wyness, surrounding Green's involvement in boardroom matters at Goodison you can begin to appreciate the fans' concerns over the transparency of ownership and, more importantly, the criteria and process by which the next owner will be selected.
Kenwright's board has added little value to the business, in fact a more accurate assessment is they've added no value. With £45m of debt, no tangible assets to speak of and the smallest squad in the premiership Everton now have a negative balance sheet with £35m of liabilities - when Kenwright took control there was £20m of assets. Any prospective owner would need to consider this situation and then adjust the offer price accordingly to reflect the massive investment required to solve the stadium situation and quickly address the years of underinvestment in the squad.
With little confidence in the track record of the board, four Everton fan groups have united under the banner of the Blue Union and are calling for the sale process to be outsourced to an organisation that can display a degree of competence in handling the sale of major sports clubs and can be tasked with selling the club to the party who can best demonstrate the ability and resources to take the club forward.
On the other side of the fence, Kenwright maintains he's the best person to sell the club. The evidence, after more than a decade of trying, would appear to prove otherwise and the longer this intransigence persists the more serious Everton's position becomes.