Thursday, September 15, 2011

Everton - No Blue Skies


Football fans are rarely happy. After all, there are only so many trophies that can be won, so the majority of teams will end the season empty handed. That said, Everton’s fans seem to be particularly despondent these days, so much so that a coalition of supporters’ groups known as the Blue Union initiated a protest march before last week’s home game against Aston Villa.

Their principal complaint is that the club is stagnating under the current ownership, but their objective is rather more sophisticated than the customary “sack the board” knee-jerk reaction to adversity of crowds the world over. Instead, this campaign is more about freeing up Everton’s executives to focus on operational issues, such as growing revenue and cutting costs, while a “fully autonomous group of professional individuals” is brought in to expedite the sale of the club to a buyer who can drive the club forward.

Everton have effectively been on the market for many years, but the chairman Bill Kenwright has so far failed to attract the new investment that the club so badly needs. Therefore, the Blue Union’s suggestion is that the club introduces a similar arrangement to the one that (eventually) worked at neighbours Liverpool, when independent chairman Martin Broughton identified John W. Henry as the Reds’ potential saviour.

"Phil Jagielka prays for investment"

Specifically, they are not seeking Kenwright’s departure, though this would not have come as a complete surprise after details of their extraordinary meeting with the chairman were published. Even if the release of a detailed transcript of a private meeting was ethically dubious, it was to a large extent justified by Kenwright’s admission that the club’s financial situation was every bit as bad as many fans had feared.

Although this was nothing new to seasoned observers of Everton’s finances, the explicit revelation that the bank had forced the club to reduce its overdraft facility and was effectively preventing manager David Moyes from signing new players was still shocking news. Indeed, Kenwright confirmed that the proceeds from the sale of players and the club’s old training ground at Bellefield had gone towards reducing the club’s £45 million debt.

Kenwright is clearly a genuine Everton fan, but at times he seemed completely out of his depth during the discussion. Not only was he vague about the long-standing issue of a new stadium, but he was essentially clueless about the club’s financials. OK, maybe that’s a bit too harsh, but he was clearly confused and really should know a great deal more after so many years as chairman.

"Tim Cahill - up for the fight"

In fairness to Kenwright, in the past he has appreciated the main issue facing Everton, which is how to keep the team challenging at the top end of the Premier League without new investment. However, his strategy, for want of a better word, has seemingly consisted of little more than relying on David Moyes to continue to work minor miracles on a shoestring budget.

With some justification, Kenwright calls Moyes “the most important figure at the club”, describing him as “a manager who will go down as one of our all time greats.” Moyes himself is proud of his achievements, pointing out that in the 10 years he has been at the club, Everton have finished in the top 10 seven times. In fact, they have done rather better than that under his guidance, as his record includes two fifth places and a memorable fourth place in 2004/05, when the team qualified for the Champions League.

However, although Moyes refuted the fans’ charge of stagnation, even he admitted that he was operating under severe financial constraints, “Of course we want to be top of the league and winning cups, but at our club, we have got a level of finances, wages we can pay and stuff that we can do. We try and then get the best team and the best performances we can out of the players we have got.” It is fair to say that Moyes has got the most out of his resources, consistently outperforming teams that have spent more.

"David Moyes - a lot on his mind"

However, these results are slim pickings to a “grand old team” with Everton’s fine tradition. Only Arsenal have a longer unbroken spell in the top flight than the Blues, who have won the old First Division nine times, the FA Cup (when it meant something) five times and the European Cup-Winners Cup once. Four of those trophies came during a memorable period between 1984 and 1987, but the problem is that even though this might seem like yesterday to Everton supporters, it is nearly 25 years ago.

Since the introduction of the Premier League in 1992, Everton have struggled to live up to their glorious past, only winning the FA Cup in 1995. After the death of former owner John Moores, the club began to struggle both on and off the pitch. The Moores family shareholding was bought in 1994 by Peter Johnson, whose tenure was fairly disastrous with the club frequently involved in a fight against relegation.

Five years later, leading theatrical producer Bill Kenwright headed a consortium named True Blue Holdings Limited that bought the club in a deal that valued it at £30 million, though the source of the funds has never been completely clear. A series of ugly boardroom disputes ensued between Kenwright and fellow directors, Paul and Anita Gregg. Both sides tried to win over the Everton fans with ambitious investment plans, Kenwright’s version entitled the Fortress Sports Fund, but neither of these came to fruition. Finally, in 2006 the Greggs sold their shares to the entrepreneur Robert Earl, a friend of Kenwright, but all the infighting took its toll.

While professing to provide Moyes with “every available penny”, the reality is that the level of funds available to the manager has been diminishing. Indeed, the net spend has been negative over the last three seasons, adding up to £20 million sales proceeds. During the meeting with the Blue Union, Kenwright said, “On average, we give him £5.6 million every year. Nine years – that's £45 million.” Leaving aside the appalling arithmetic, that’s palpably incorrect in recent times.

In fairness to Everton’s board, they did break the club’s transfer record three times between 2006 and 2008: first for speedy striker Andrew Johnson £8.6 million, then Nigerian international Yakubu £11.25 million and finally powerful Belgian midfielder Marouane Fellaini £15 million.

However, since then Moyes has had to sell to buy. Everton’s last major splurge came in the summer of 2009 as the £22 million proceeds from Joleon Lescott’s transfer to Manchester City was spent on Diniyar Bilyaletdinov £10 million, Johnny Heitinga £6 million and Sylvain Distin £4 million.

Everton’s chief executive, Robert Elstone, summed up the club’s approach, “We have to be astute in the transfer market and the manager and the chairman have a good record in doing that.” He’s not kidding, when you consider that Moyes managed to secure the services of Tim Cahill, Mikel Arteta, Phil Jagielka, Steven Pienaar and Seamus Coleman for less than £10 million in total.

However, the lack of activity has become really pronounced in the last two years with only Newcastle having a lower net spend than Everton in the Premier League over that period – and that was largely due to the extraordinary £35 million sale of Andy Carroll to Liverpool. No wonder that Elstone drily observed, “It is fair to say we have not got a big transfer war chest. I can’t see us smashing our record transfer fee on a regular basis.” Quite.

In fact, even the three sides just promoted from the Championship have comfortably outspent Everton. Closer to home, it must be especially galling that Liverpool have splashed out well over £100 million on new players in 2011. In stark contrast, Everton have seen the departures of Pienaar, Arteta, Yakubu, Jermaine Beckford and James Vaughan since the turn of the year, with only a couple of loan signings coming the other way: Dutch misfit Royston Drenthe and unheralded Argentine strike Denis Stracqualursi.

Moyes confessed his concerns after yet another frugal transfer window, “It will be really difficult to finish in the top 10. I think we are going to have a big struggle. Look at the spending of Stoke, Sunderland, Fulham and West Bromwich Albion.” The only positive to take was that they did not also lose Jagielka, Fellaini and coveted left-back Leighton Baines.

Although Everton’s financial problems may not have attracted the media coverage of some other clubs, the fact is that their business model is bust. Essentially, their strategy has been to run the club at a loss every year in a gamble to achieve success and to fund this by steadily increasing their debt, but now the banks have stopped extending them credit.

It is not too difficult to see why they have made this decision, as Everton’s profit and loss account looks simply awful. Even with healthy turnover of £79 million, they reported a loss of £3 million. In fact, they have only managed to record a profit once in the last eight years – and that was only due to Wayne Rooney’s big money transfer to Manchester United in 2004/05.

Since “Wazza” was sacrificed, the club has suffered £30 million of cumulative losses: 2006 £11 million, 2007 – £9 million, 2008 – zero, 2009 – £7 million, 2010 – £3 million. Over half of that has been due to interest payments, which have risen to £4.5 million in 2010. However, the fundamental problem is that cost growth is significantly outpacing revenue growth. The trend is clear with EBITDA (Earnings Before Interest, Taxation, Depreciation and Amortisation) declining from £12 million in 2005 to just £1 million in 2010.

Once non-cash items like player amortisation and depreciation are included, we can observe the deterioration in operating profits, which were at break-even in 2005, but are now showing a hefty loss of £18 million in 2010. In that period, revenue has grown by £19 million (32%) from £60 million to £79 million, while total expenses have shot up by £37 million (61%) from the same level of £60 million to £97 million. The situation is actually even worse than that, as revenue has hardly grown in the last two years, while the cost growth shows no sign of slowing down.

On the face of it, last season’s £3 million loss does not look too bad, but this would have been much worse without the benefit of £19 million profit on player sales, almost entirely due to Lescott’s departure. Without that once-off boost, the 2010 loss would have been a truly depressing £22 million.

Player sales have had a disproportionate impact on the club’s results for many years, contributing £59 million profit since 2005. In other words, the losses would have been even higher if the club had not been selling players. The impact was most obvious in 2005 when Rooney’s sale resulted in a net profit of £23m, but you can also see its importance the following year when the club reported an overall loss of £11 million, as there was no profit from player sales.

As operating losses have increased since then, the importance of player sales becomes even more evident. The key point is that if Everton do not repeat player sales at the same level as 2010, namely around £20 million, then it is extremely doubtful that they will break-even in future. This is unlikely to be music to the ears of Everton fans, but it’s a harsh reality.

Given the above, it might seem a little bizarre that chief executive Robert Elstone said that this was “a healthy set of accounts”, but in comparison with some other clubs, you can sort of see what he means. Everton are by no means the only football club that struggles to balance its books and their loss of £3 million in 2009/10 actually made them one of the better financial performers in the Premier League.

In fact, just four clubs were profitable that season (Arsenal £56 million, Wolverhampton Wanderers £9 million, WBA £0.5 million and Birmingham City £0.1 million), while only one club (Blackburn Rovers) made a smaller loss than Everton. Half of the Premier League made losses over £15 million, while the losses at the clubs that finished in the top three places in 2010/11 were stratospheric: Manchester City £121 million, Manchester United £80 million and Chelsea £70 million. However, the difference between those clubs and Everton is that their owners have largely covered these losses.

Everton’s revenue of £79 million places them in a slightly strange position. On the one hand, this is the eighth highest in England and only one position behind Aston Villa, who enjoy the 20th largest revenue in Europe, according to the Deloitte Money League.

On the other hand, the problem is that their revenue lags way behind other major clubs. It’s significantly behind the so-called “Sky Four” (Manchester United £286 million, Arsenal £224 million, Chelsea £201 million and Liverpool £185 million), who benefited from Champions League riches in 2009/10, but it’s also a fair bit below Everton’s natural challengers (Manchester City £125 million, Tottenham £120 million and Aston Villa £90 million) with the gap expected to grow still wider when the 2010/11 results are published.

This disparity is important, as money tends to equate to success in football. For example, in 2009/10 the seven clubs that finished ahead of Everton in the Premier League were exactly the same as those above them in the Money League. Arguably, Everton could be described as being the “best of the rest”, though their revenue was only £3 million higher than Fulham’s.

The other major issue with Everton’s revenue is that it is not really growing. Elstone recently boasted, “We have signed record sponsorship deals and hugely increased our income”, but the reality is that any growth is almost entirely due to broadcasting revenue. This has risen from £28 million in 2007 to £50 million in 2010, but this has little to do with the club, being almost entirely due to the distributions from the collective sale of Premier League TV rights.

Those revenue streams under the club’s control have essentially remained flat for the last three seasons with commercial income growing slightly from £9 million to £10 million and gate receipts actually falling from £20 million to £19 million. This means that Everton, like many of the clubs in the Premier League, have become very reliant on television money, which now represents 63% of their total income.

In 2010 Everton’s TV revenue of £50 million largely consisted of £43 million from the Premier League plus £4.2 million for reaching the last 32 in the Europa League. The Premier League distribution has risen every time a new three-year deal is signed, as can be seen by the substantial increase in 2008, and there will be a similar £7 million increase in 2011 to just under £50 million, mainly due to the substantial increase in overseas rights.

Given its importance to Everton’s revenue, it is worth understanding how the Premier League allocation works. Each club gets an equal share of 50% of the domestic rights (£13.8 million) and 100% of the overseas rights (£17.9 million). However, facility fees (25% of domestic rights) depend on how many times each club is broadcast live, which hurts Everton, as they were only shown 13 times, a lot less than other clubs. This meant that they received £7.3 million, compared to Manchester United’s £13.5 million. Finally, merit payments (25% of domestic rights) are worth £757,000 per place in the table, leading to £10.6 million for Everton’s seventh position.

Of course, Everton’s 2010/11 TV money will be adversely impacted by the lack of European competition, though it’s only Champions League teams that receive the big bucks, e.g. last season the four English entrants boosted their coffers by an average of £35 million. Although the money was not so high 20 years ago, the ban on English clubs following the Heysel tragedy has undoubtedly cost Everton dearly. In fact, in his own slightly chaotic fashion, Kenwright pinpointed this issue in his chat with the supporters, “You can see the problem in football. United, Arsenal, Chelsea, they get double our TV money, placement money plus Champions League.”

Of course, that’s not Everton’s only problem, as can easily be seen by looking at their mach day revenue of £20 million, which is about one-fifth of Manchester United and Arsenal. Fair enough, their stadiums are considerably larger than Goodison Park, whose capacity is only 40,600. However, Anfield is not that much larger and Liverpool still earn more than twice as much as Everton. Even more striking is that Spurs generate nearly double Everton’s gate receipts, though their ground is actually smaller.

Looked at another way, each home game at Everton produces less than £750,000, compared to more than £3.5 million at United and Arsenal, despite what Kenwright described as a “magnificent level of support.” Average attendances have indeed held reasonably steady, though they did fall to 36,039 in 2010/11, but it’s the lack of decent corporate facilities that has really hurt Everton’s match day income, which actually fell £3 million in 2010 to £19 million. Even though there were three more home games, the previous season included a fair bit of money for the run to the FA Cup Final.

Although Everton have improved their commercial operations in the last few years, the revenue remains fairly feeble at £10 million. To place that into perspective, this is less than a third of Tottenham’s £32 million. Although the club complained that it was difficult to compete commercially with clubs “regarded as having a greater international profile”, such as Manchester United, Liverpool and Arsenal, Everton are surely at least as attractive a proposition as clubs like Spurs and Villa.

To be fair, the club outsourced its merchandising and catering operations in 2006 and its retail business to Kitbag in 2009, which means that their reported income is around £7 million lower than it would be if these activities were still in-house, but the relatively small sponsorship deals should still be questioned.

Everton have enjoyed a long-term shirt sponsorship deal with Chang Beer, which has been extended no fewer than four times, the latest running until 2014. This increased the annual payment from £2.6 million to £4 million (partly performance-related), but this is still only half as much as Aston Villa’s new £8 million deal with Genting and a lot less than Tottenham’s £10 million deal with Auresma. Of course, Liverpool and Manchester United are in a different commercial league altogether with their deals worth £20 million per annum.

The 10-year Kitbag deal is expected to generate more than £30 million over the duration of the contract. As part of the agreement, Everton switched kit suppliers from Umbro to Le Coq Sportif, the brand worn by the team during one of its most successful season in 1984/85, which should generate a further £3 million. This also led to the refurbishment of the megastore opposite Goodison and the Everton Two store, which boasts the inspired address of “Everton Two, Liverpool One”, as the latter is the name of its shopping complex location.

Like all other football clubs, the main reason for the cost growth is the wage bill, which has surged 76% (£23 million) from £31 million in 2005 to £54 million in 2010. This has caused the crucial wages to turnover ratio to rise during this period from 51% to an uncomfortable 69%, which is only just below UEFA’s recommended upper limit of 70%, though it would come down to “only” 64% if the outsourced operations were included in the club’s turnover.

Elstone commented that this “simply serves to underline our commitment to both signing the best available players and to securing the long-term future of those already at the club.” In 2009/10 Everton effectively replaced one international player (Lescott) with three arrivals (Bilyaletdinov, Distin and Heitinga), so had to cover two new salaries plus the loan cost of Landon Donovan. In addition, there were new contracts for Louis Saha, Tim Howard, Jack Rodwell, Joseph Yobo and Phil Jagielka.

There’s no doubt that it would be difficult for any club to remain competitive without participating in the salary “arms’ race”, a point that Moyes stressed in the summer of 2010, when he warned the directors that Everton risked losing their key players unless they broke the wage structure. This led to more contract extensions for Mikel Arteta, Tim Cahill, Leighton Baines, Seamus Coleman and Victor Anichebe. Arteta’s salary alone was reported to have increased from £45,000 to £75,000 a week.

It is therefore likely that the wage bill for 2010/11 will show a further increase (the Blue Union is estimating £58 million), before falling the following season due to numerous player departures and loans.

In fairness, Everton’s wages of £54 million are nowhere near the highest in the Premier League with five teams having wage bills more than twice that level: Chelsea £173 million, Manchester City £133 million, Manchester United £132 million, Liverpool £114 million and Arsenal £111 million. Other teams challenging for Europa League places also pay a lot more, such as Aston Villa £80 million and Tottenham £67 million. In short, Everton’s wage bill could be described as mid-table, so any league placing higher than this should be considered a bonus.

The other aspect of player costs, namely amortisation, has also been rising – from £10 million in 2007 to £17 million in 2010. When a new players is bought, football clubs do not write-off the cost immediately, but instead book it onto the balance sheet as an intangible asset and write it off over the length of the contract, as the assumption is that the player would have no value after his contract expires, since he could then leave on a “free”.

As an example, John Heitinga was bought for £6 million in 2009 on a 5-year contract, so £1.2 million amortisation is booked to the accounts in each of the next five years. Over time amortisation costs can have a real impact, which is what has happened at Everton. The 2010 charge of £17 million might be low compared to a big spending club like Manchester City (£71 million), but it’s a lot in the context of Everton’s £79 million revenue, though it’s likely to fall following the lack of transfer activity.

Everton’s other operating costs of £24 million are a similar level to Tottenham £27 million and Aston Villa £25 million, but they seem very high in relation to the size of the club. They represent 25% of total costs, only surpassed by Arsenal (due to the Emirates effect) among the leading eight clubs, and 30% of revenue, only below Manchester City, whose ratio will fall following their certain revenue growth.

The massive increase from £12 million in 2007 to £21 million in 2008 is unexplained, though it should be noted that theses costs averaged £17 million in 2005 and 2006. Part of the rise is certainly due to higher expenses at the Finch Farm training facility compared to Bellefield, but the lease here is no higher than £1.5 million. Kenwright did not exactly clear up the ambiguity of what is included here, when the Blue Union put the question to him, “When you say other operating costs what do you mean? I don’t know, I have no idea.”

The chairman was equally vague last year when discussing the club’s debt, “I do not understand why football clubs have such big debts, it is a mystery. Our debt is a big debt and a worrying debt, but it is manageable because of our performance on the field… but it is too much debt that every year is going to be added to.” That part’s certainly true, as the net debt has more than doubled from £20 million in 2005 to £45 million in 2010. It rose £7 million last year alone.

The debt has been rising because the club has been spending money that it does not have on strengthening the team. As Elstone put it, “our pursuit of success has stretched our finances.” The result of this risky strategy is clear to see, as the club is burdened with a 25-year loan from Bear Sterns (now at £25 million), which has the advantage of being long-term, but carries a high interest-rate of 7.79%, leading to annual payments of £2.8 million. The only way that Everton can manage to pay this is by increasing its bank debt, so the club has built up bank loans of £17 million and an overdraft of £5 million.

Although Everton’s debt is by no means excessive compared to other football clubs, the problem is that they appear to have no realistic way of paying it off. That is why the bank has capped the club’s overdraft at £25 million, which has meant that the £8 million received for the sale of Bellefield last December and the proceeds from this year’s player sales have gone directly to the bank.

"Tim Howard - shout, shout, let it all out"

Furthermore, the loans are covered by the securitisation of future revenue (TV money and ticket sales). The accounts also note a potential sting in the tail with up to £12 million of contingent liabilities for transfers, which are payable dependent on future appearances and loyalty bonuses.

Everton’s total liabilities are actually £95 million, leading to net liabilities of £30 million, so £50 million of value has been lost in just over a decade, as the balance sheet had net assets of £19 million in 1999. Most of the club’s assets have been sold off, which also increases costs for higher rents, while Goodison’s value is declining.

The only substantial assets left are the players themselves with a book value of £45 million, though Elstone points out that accounting conventions mean that players are recorded in the balance sheet way below market value. This is certainly true, especially as nothing has been included for home grown players, and the respected Transfermarkt website lists a value of £120 million. However, the problem is that for the club to access that value, they would have to sell those players.

The cash flow statement underlines the fundamental problems with Everton’s business model, as the cash flow has been negative for the last five years. Take last year, when the club’s revenue was just about at record levels, they sold Lescott for an incredible £22 million, they took out net new loans of £6 million – and yet there was still a net cash outflow of £1 million.

So is there anything that Everton can do? Is there a blueprint for success?

I can see five possibilities: (a) be successful on the pitch; (b) cut costs; (c) build a new stadium; (d) find a wealthy benefactor; (e) focus on youth.

"Marouane Fellaini has a hair-raising experience"

(a) As we have seen, higher places in the Premier League produce higher merit payments, but to make a meaningful difference to the revenue, Everton would have to qualify for the Champions League on a regular basis. Although they have managed that once during Moyes’ tenure, thus proving that it’s not impossible, this objective seems further away than ever today with the traditional “Big Four” being supplemented by Manchester City and Spurs.

Furthermore, fourth place does not guarantee qualification to the lucrative group stages, but only to a qualifying match, where the luck of the draw plays a huge part. Everton would be only too aware of that, as they were (unluckily) eliminated by Villarreal in such a tie in 2005.

(b) All football clubs could cut costs, but this approach would almost certainly condemn Everton to a regular struggle against relegation. To achieve break-even, Everton would have to reduce the cost base by £15 million, assuming that £10 million profit is made on player sales each year.

Assuming that operating expenses are reasonably fixed, that would mean cutting the wage bill by nearly 30% to £39 million. Only three clubs had a lower wage bill that that in the 2009/10 Premier League – and two of those were relegated. If Moyes has been fighting with one arm tied behind his back up to now, this would be tantamount to also binding his legs together.

(c) A new stadium would help address the low match day income, but it appears no closer now than when the search first started 15 years ago. A proposal to build a stadium as part of the King’s Dock regeneration was scrapped in 2003 when the club failed to raise sufficient money, while the government rejected the planning application to build a new 55,000 capacity ground as part of a retail park in Kirkby, on the outskirts of Liverpool.

On the face of it, this was a real blow to the club, as they had been putting all their energies into this scheme with former chief executive Keith Wyness going so far as to describe it as “the deal of the century”, because Tesco were going to pay a proportion of the construction costs, leaving Everton to fund the remainder by selling Goodison Park and Bellefield and charging for naming rights at the new stadium.

However, the rejection might just have been a blessing in disguise, as many fans never warmed to the idea of moving to Kirkby, prompting the formation of the “Keep Everton In Our City” (KEIOC) campaign. In addition, the financials did not seem to add up, as the assumptions behind the funding looked optimistic, while a study performed by Deloitte on behalf of Everton estimated a paltry £6 million extra profit a year and that was based on the club almost filling the 50,000 stadium every match.

"A man of Distin-ction"

The focus appeared to have switched to improving Goodison, especially after the announcement of a £9 million office and retail development, funded by partners, that will free up space inside the stadium for profitable corporate facilities. Elstone admitted that it was unrealistic to expect the club to be inside a new stadium within five years, later adding, “there is a shortage of a viable funding model”, which had always been obvious to most rational analysts.

However, to the surprise of nobody, this viewpoint was contradicted by Kenwright, who recently said, “There are six sites we’re looking at, three of which we’re really keen on: Edge Lane, Speke and another one.” Even with the support of Liverpool Council, who have proposed using the rapid transit Merseyrail line to ease transport access, the only viable way forward for a new stadium would be if a new owner were prepared to fund the construction.

(d) Although Bill Kenwright might be a great bloke, as he admitted himself, he is “a pauper when it comes to other chairmen.” The harsh reality is that the current owners have not put any money into Everton football club, which is in stark contrast to other benevolent owners, e.g. £187 million at Fulham, £115 million at Sunderland, £85 million at Bolton, £52 million at Wigan and £43 million at Stoke.

"Bill Kenwright - True Blue"

In the last annual report, Kenwright stated, “I continue to work tirelessly to find that rich and generous benefactor”, but he has been looking to attract other investors for years without success. He maintains that “no-one can sell the club better than me”, despite all evidence to the contrary, such as the recent admission that Everton allowed one potential investor to conduct due diligence in the belief that he was the head of ICI in the Far East, even though that company was taken over three years ago.

Some have questioned whether Kenwright is actually serious about selling the club, but, in fairness, there are many clubs searching for a benefactor and the tough economic climate has not helped.

Even David Moyes has got involved, suggesting that Everton would be an attractive investment, as they “could be very close to being very good for not an awful lot of outlay. It might not be one of those clubs that needs £300-400 million to turn it around.”

"Seamus Coleman - he's mustard"

He might have a point, but to do the job properly would require investors with very deep pockets. First, they would have to buy out the directors’ shares, which an investment bank estimated would cost £75 million, but they would also have to repay the loans £45 million, fund a new stadium £250 million, buy new players £50 million and inject working capital to cover losses £50 million. That doesn’t leave much change from half a billion.

(e) Probably the most realistic policy would be to focus on developing young players at the technically advanced Finch Farm academy, counting on profitable sales at a later stage. Everton are renowned for having a brilliant youth system that has produced the likes of Rooney, Rodwell and Ross Barkley. As Moyes pointed out, the flip side of not spending money on buying new players is that youngsters will always get an opportunity at Goodison.

Clearly, a selling policy would not prove universally popular with the fans, but it is not necessarily a negative strategy, as plenty of clubs have flourished by adopting such a business model, e.g. Porto, Lyon and Udinese. The other advantage for Everton is that they are quite close to operating this way in any case. At least it would be more under their control, rather than crossing their fingers and hoping for a new owner and/or stadium.

"Ross Barkley - here's to future days"

For many years, Everton under Moyes have been punching above their weight, but even the manager has embraced a new sense of caution, suggesting that it would be “a struggle” for his team to finish in the top half of the table this season. He added, “We have to be careful in what we believe Everton are capable of achieving.”

No matter how much Everton’s passionate following wants the club to return to its former glories, this will be virtually impossible unless there is a dramatic improvement in the financial position. The fans really do deserve better from the board: a clear, coherent strategy would be a step in the right direction.