FINANCIAL FOOTBALL NEWS

Everton once again finished 8th in the Premier League in 2018/19, missing out on the Europa League and a lucrative pay check.

It was a similar season to 17/18 with no significant cup runs, with the only real difference being the lack of European football.

This was despite a near £100m transfer spend that was meant to close the gap on the top six, however inconsistencies throughout the season let the team down at vital moments.

This significant transfer spend and the lack of player sales this year mean that Everton are likely to see mounting losses that may cause financial issues going forward.

Let’s have a look at the numbers.

Revenue Prediction

Matchday Revenue

Everton earned matchday revenue of £16m in 2018 after 25 home games in the campaign. The lack of European games saw Everton have three less home games and average attendance remained stable, decreasing slightly 38,797 to 38,780.

Due to the fall in home games, we expect Everton’s matchday revenue to fall slightly to £15m. In comparison, Everton had matchday revenue of £14m in 2017 when they last didn’t have European football.

Commercial Revenue

Everton had commercial revenue of £43m in 2018. It is worth noting that this includes Europa League revenue, which is included in ‘Other commercial activities”, along with corporate hospitality and events income.

Usually we would record this within broadcasting revenue, however due to not knowing the exact amounts we will predict its effect on ‘commercial revenue’.

UEFA have reported that Everton earned £14m from their Europa League campaign, despite exiting at the group stage. This will leave a sizeable hole in their revenue without this income, immediately reducing their commercial revenue by £14m.

Everton have the same shirt sponsor (Sports Pesa) and kit manufacturer (Umbro) as in 2018. Being the two major lucrative deals the club have, commercial revenue is unlikely to change too much.

Based on the lack of Europa League football and only a slight increase likely in sponsorship income, commercial revenue is likely to fall by around £12m to £31m.

Broadcasting Revenue

Everton once again finished 8th placed in the Premier League. In 2018, Everton earned Premier League distributions of £128m after featuring 19 times on TV.

2019 saw a slight increase in Premier League income to £129m after an increase in distributions by the Premier League, despite a fall in TV games shown to 18.

Everton’s domestic performance had minimal change and therefore will have limited financial impact.

Therefore, we expect Everton’s broadcasting revenue to increase by £1m to £131m.

Total Revenue

Based on the above assumptions, Everton should see total revenue fall by £12m to around £177m, primarily down to having no European football. 

Everton will be relying on commercial growth to not experience a major revenue drop and will need to qualify for the Europa League to see any significant revenue rises going forward.

Costs Prediction 

Amortisation

Everton recorded amortisation of £67m in 2018. Major signings Richarlison, Mina and Digne will see a significant rise in amortisation in 2019.

Based on these additions and the lack of player sales, amortisation should rise to at least £80m depending on the amortisation players left attracted.

Exceptional costs

Everton had exceptional costs of £34m in 2018 after the sacking of Koeman and feasibility/project spending on their potential new stadium.

There may be such costs in 2019 if further stadium planning occurred in 2019 however this is uncertain, while Allardyce was on a short term contract so not much, if any compensation will be due after his termination.

Based on this, our best estimate is that there will be none of these costs next year and therefore costs will fall by £34m.

Wages

Everton recorded wages of £145m in 2018, only a few million pounds less than Tottenham, showing what can be achieved despite a relatively low wage bill compared to the other members of the top six.

On top of the three big signings already mentioned, Everton spent large amounts on the wages of loanees Zouma, Gomes and free signing Bernard.

A few high earners left in Klaasen, Mori, Mirrallas, Rooney and Robles.

Based on these signings and departures, it is likely there will be significant wage growth, with wages increasing to around £160m at least.

Other Operating Costs

Everton recorded other operating costs of £36m in 2018. We expect similar levels of costs here with a slight increase to £38m.

Total Costs

Everton’s total costs were £287m in 2018. Owing to the lack of exceptional costs in 2019, Everton should see a slight fall in total costs to £285m. This is highly dependant on how much wages grow by.

If there is further wages growth above what we have predicted, or if there had been other exceptional costs in 2018/19, there could potentially be a growth in costs.

Based on the reduction in revenue, and the relatively stable costs, profitability has fallen significantly.

Transfers Analysis 

Everton were big spenders in the summer transfer window, strengthening in key areas as they looked to back their new manager, Marco Silva.

In came Richarlison (£35m), Mina (£27m) and Digne (£18m) for a combined £80m.

Departing Goodison Park were Klaasen (£12m), Mori (£8m) and Browning (£4m) for a combined £24m.

The signings did well and were a step in the right direction, improving Everton in their positions. Despite the improvements the signings made, it wasn’t enough to bridge the gap to the top six, who also strengthened.

Everton recorded a profit on player sales of £88m in 2018, owing mainly to the sale of Lukaku to Manchester United. The sales in 2019 were less significant and Everton will record a loss on the sale of Klaasen, having signed him for £24m only a couple of seasons ago. This loss will negate the profits realised on Mori and Browning so Everton are likely to only break even in transfers this year.

Therefore, Everton have a gaping £88m Lukaku sized hole in their finances that we will come to in the next section.

Everton also had to pay £55m in transfer fees from previous windows, however this was more than covered by the £64m clubs owe them for recent player sales (such as Lukaku). Everton do also owe a further £33m which is due in 2020 and beyond however this shouldn’t affect future transfer plans significantly, whereas the rising losses may do…

Profit/Loss Prediction 

Everton made a loss of £13m in 2018 despite the profit on player sales of £88m which were largely due to the Lukaku sale.

Without these sales, and the likely fall in revenue while costs remain stable, is likely to see a huge financial loss in excess of £100m in 2019.

Such a huge loss is likely to call in questions of Financial Fair Play (if they qualify for Europe) and also the Premier League Financial Sustainability rules, which to date are yet to be broken.

It will be interesting to see how this develops over the season with little hope of improving profitability without player sales (at a profit) which do not seen forthcoming currently.

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