If you were after a textbook example of top-flight English football’s failed business model, you couldn’t go wrong with Everton – consistently decent Premier League performers with consistently high home crowds and a consistently money-generating transfer policy. Yet, without a sharp shift in attitude and fortune, financial ruin awaits.

Since last writing on Everton, little has changed in their attitude to protesting supporters, who appear somewhat “ahead of the game” in realising the need for fresh financial strategies. And the latest accounts tell a familiar story.

There is little denying club chairman Bill Kenwright’s motivation. It is hard to dispute CEO Robert Elstone’s claims that Everton are working tirelessly (as officials of every ‘club-in-crisis’ do). But the figures do not lie. Everton’s finances are consistently in Liverpool’s colours. And their short-term solutions inspire diminishing confidence. Both the ‘Director’s Report” and the first “note to the accounts” for the year to May 2011 contain gargantuan sentences about the club’s re-financing strategy – a formal recall of a year negotiating with financial institutions, and a formal version of Kenwright’s now-famous phrase: “I’ve told the bank ‘don’t kill us this season,’” the soundbite which exposed most succinctly Everton’s financial direction.

Via the accounts and accompanying statements from Elstone, Everton have tried to portray the borrowing of millions of pounds against future broadcast revenues as “business as usual” and “common industry practice” (which it is… in an industry as financially madcap as football). However, institutions such as Barclays Bank have been replaced among club creditors by lesser-known money lenders (e.g. Vibrac Corporation) with smaller reputations and British Virgin Island addresses – rarely a sign of rude financial health, in football at least. Rumours that moneysupermarket.com are waiting by their proverbial phone are more difficult to discredit than they should be.

There is nothing new in presenting football club accounts in a positive light – indeed, you could even call it “common industry practice” at a push. But these, even for Everton, are ferociously spun, to back up the headline view that they are “solid” figures. Many clubs would headline with record turnover of £82m and an operating loss before player trading of £500,000, especially if they spent the entire turnover increase – and £800,000 more – on wages and recorded a pre-tax loss of £5.4m. Everton’s increased turnover was “supported by a stable, well-managed cost base” which sounds… well… stable – a word oft-used by Everton’s finance people, as their operating loss and net debt figure (£44.9m) also “remained stable.” However, this phrase misleads as much as “the rate of growth slowed down.” In reality, a “stable” operating loss means “we lost as much as last year.” And “stable” net debt means “we owe as much but have less time to pay.”

The ‘financial review’ notes that “£20m (2010: £21.8m) is not due for repayment for more than five years.” This suggests, and is surely designed to suggest, falling debt. However, the review omits to note that “£24.9m (2010: £23.8m) is due within five years,” less-impressive-looking, but equally true. Even the £2.9m turnover increase was more down to Premier League chief executive Richard Scudamore than any Evertonian, as £2.7m came from increased broadcast revenue, itself mostly “resulting from the first year of the new Premier League TV rights deal.” And impressions of solid stability are undermined by the “profit on disposal of tangible fixed assets of £8.4m (2010: £nil),” one-off proceeds from selling the Bellefield training ground, which, protesting supporters’ groups rightly emphasised, was the club’s last “non-playing” asset.

There is no more family silver to sell without diminishing the playing squad, and the accounts include an admission that Everton must continue selling players to survive. Indeed, Everton’s looming financial crisis is thoroughly exposed in this explanation which, tellingly, is filed under “risks and uncertainties.” They “obtained future funding” (£14m borrowed at an undisclosed interest rate from Vibrac) “because of the predictable nature of football club revenue streams.” But “the amount and terms” of their “current overdraft facility” beyond next July, when it expires, will be determined by two unpredictable, semi-competing factors. The first, the merit award for “performance in the 2011/2012 Premier League season”, could be affected by the second, “player trading activity” in the January and summer transfer windows. And whilst “post-balance sheet events” reference “net transfer fees receivable of £13.032m” (mostly from the August deadline day departure of Mikel Arteta to Arsenal), Everton’s £5.4m losses, after selling Bellefield for £8.4m, suggest this needs to be an annual event.

As it says amid the “risks and uncertainties”: “based on the mitigating actions… above, the directors have a reasonable expectation” that the club “will have adequate resources to continue in operational existence for the foreseeable future.” Recent analyses of Everton’s finances, pre-dating but not necessarily affected by the latest accounts, say Everton must also continually produce top-class talent through their rightly-lauded academy system. Ross Barkley is the highest-profile of recent academy graduates. And his recent signing of a four-and-a-half-year contract perhaps should be seen more in this context than media reports have managed. But Everton’s Academy is so successful that it is difficult to see how the “revenue stream” it produces can be increased. So if Everton are looking to turn finances around by – to use that ugliest of financial phrases – “sweating” this “asset”, they are looking in the wrong place.

None of this appears to impact upon Everton’s mostly faceless board. Kenwright has such a monopoly on the media’s Everton focus that he is regularly labelled Everton’s “owner”, despite only owning 37% of the club’s shares. The other directors… well… if you’re not an Evertonian, you name them. Exactly. Bear with me while I look them up but… ah, yes… Robert Earl, the American “casino and leisure entrepreneur”, holds 35%. Computer games producer and non-executive director Jon Woods, with family links to the Everton’s earliest days, has 27%. Sir Phillip Carter, chairman throughout Everton’s successful spell in the 1980s, has a minimal shareholding. But for all the visible influence the other directors have, theirs might as well be too.

Their non-activity has been a major focus of supporter protests. But as time has passed, Kenwright has become the particular target. Initially, this may have seemed a risky strategy. But it looks less so every time Kenwright opens his mouth in public. In August, supporters organisation the “Blue Union” (TBU) (in)famously exposed Kenwright’s frailties as a football club director. Since then, with willing media accomplices (check former communications officer Ian Ross’s private e-mails for details, apparently), he has sought to repair this reputational damage. His genuine affection for Everton garners genuine affection among fans, which was demonstrated on the day of TBU’s September 10th protest march when Goodison Park’s big screens showed him during Everton’s 2-2 draw with Aston Villa and much of the crowd cheered.

Match of the Day made a rare if predictably superficial foray into football politics by covering the march but gave equal billing to Kenwright. Yet few fans with doubts about Kenwright would have been fooled by this PR stunt. Likewise, a toe-curlingly embarrassing puff-piece in the Daily Mail on September 9th, masquerading as an in-depth interview by Martin Samuel, who abandoned his news sense, ignoring Kenwright’s bemused ignorance (not realising protests at a pre-season friendly at Birmingham were about him) in favour of nauseating mawkishness. It was a Kenwright ‘greatest hits’ package: “I’m great at selling Everton Football Club (honest to God I am),” “I take nothing out of this club,” “Guys, I don’t want to be here this time next year,” and many, many more – with a bonus track about his 93-year-old mother for the DVD.

His PR onslaught took in October’s “Leaders in Football” shindig and a bizarre BBC radio interview with… former Liverpool chief executive Christian Purslow. Kenwright’s line was less original than the choice of interviewer, the usual mix of sob story and self-delusion. Only “lucky manoeuvring” saw the Abu Dhabi United group buy Manchester City, not Everton. And he added: “I think Evertonians would rather stay with me, for all my drawbacks… we take in around £81m, which is fantastic when you look at the figures and where we were ten years ago…” The former is less true than when Samuel’s puff-piece ended with a pathetic, faux-bemused “there is a protest march against the man who spoke these words,” – a malevolent simplification of TBU’s objectives. And TBU have “looked at the figures.” In October, long-time board critic Colin Fitzpatrick gave an informative, comprehensible presentation on Everton’s finances to a TBU public meeting.

The presentation, replete with the figures only just released by the club, made comparisons with similarly-sized Premier League club, particularly Tottenham Hotspur. This made sense, as Tottenham’s recent growth and success so overshadows Everton’s, and there were more pertinent historical reasons which may shock younger readers. The late 1980s equivalent of the “top four” was the “big five.” And there, alongside more predictable 1980s names – Liverpool, Arsenal and Manchester United – were Tottenham and… yes… Everton. Indeed, TBU’s definition of the club’s current malaise as “stagnation” is also historical. “The best word to describe Everton was stagnation,” wrote David Conn in his (ulp!) 1997 book The Football Business, about the club’s situation in… 1993.

Kenwright embarked upon a narrower PR-exercise to coincide with TBU’s November 19th protests, gathering local and national media to make wholly predictable promises about “funds available” for January transfers, over-simplify TBU’s campaign (“they want an owner with much more money”) and “reveal” that “three or four parties” were interested in buying the club, a curiously low figure at which to lose count. But, again, this schmoozing will have changed few minds. The division of opinion over Kenwright remains as stark as his recently and maliciously “updated” Wikipedia entry, which is now a chaotic hybrid of polarised opinions. Amid a hagiographic entry (“he is considered approachable by fans”) is an evisceration of his entire Everton record, which would be a terrific article on a campaigning website but leaps alarmingly from the page of an encyclopaedia.

For instance: “Mr Kenwright claims that there is ‘no bigger Everton fan than me.’ I believe this is incorrect and disrespectful to most Everton fans… who spend their hard-earned money travelling the length and breadth of the UK and abroad… to watch the club they love and adore.” Yet for all the criticism Everton’s board merit, merely finding a rich owner won’t solve their fundamental problems. The prospect of an Emirates-fashion stadium move is heavily-distant, for reasons still too painful to recall… and too detailed for even this generous word-count. So Everton must either spend more than they earn, in order to compete with other clubs who spend more than they earn, or risk annual relegation battles with a much-diminished squad. And if that is the choice facing consistently decent Premier League performers, with consistently high home crowds and a consistently money-generating transfer policy then top-flight English football’s business model really has failed.

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