On Christmas Eve we produced a relatively upbeat report on Everton's finances, although qualified by a later report on cost overruns on the key new stadium project: Record financial results
The estimable 'Swiss Ramble' has produced a more forensic analysis of Everton's analysis. Unfortunately, he now only tweets his analysis instead of putting them on a blog, so I am going to summarise the main points here.
Everton are the club that have the best chance of breaking into the top six, but the Swiss Ramble's analysis suggests that the gap is widening. Indeed, last night's defeat at home by Manchester United might be seen as confirmation of that on the pitch.
The good news is that Everton do have the 7th highest revenue of any Premier League club (it's just possible that West Ham United might overtake them when they publish their 2016/17 results). However, their income is still less than a third of that of Manchester United, £171m against £581m.
When you start to drill down in the figures the first point that strikes you is Everton's huge reliance on television income, 76 per cent. Now it is the case that all Premier League clubs are very reliant on that income source, but the top six have a more balanced revenue mix.
One area in which there is a big gap is commercial income. Everton's commercial income did double to £27m compared with 2013. Much of the gain in the last year was due to a £6m training ground rights deal with a company associated with majority shareholder Farhad Moshiri. However, in the same period (from 2013) Manchester United's income from that source has grown by £123m to £276m. Some of that is down to some very big sponsorship deals, but United have a very sophisticated global operation that is capable of getting someone from Botswana to sponsor the corner flags. OK, that's a joke, but it's not far from the truth.
Moshiri has stepped up to help the club with a £105m loan which is interest free. That means that the club will pay no interest which was eating up £4.7m a year to no good effect. Everton's gross debt of £105m is much less than Manchester United at £503m, Arsenal at £227m or rivals Liverpool at £163m.
Nevertheless, the £23m generated from operations in 2017 was not enough to cover £40m net spend on players or £6m investment in infrastructure. The wages to turnover ratio of 61 per cent is higher than Manchester United (45 per cent), Arsenal (47 per cent) or Manchester City (56 per cent). Although it is above the 50 per cent level recommended by Deloitte, I would not regard it as dangerously so. Perhaps the more significant statistics is that the wage bill at £105m is still less than half that of Manchester City, Manchester United and Liverpool (£222m).
For many years Everton essentially follow a break even policy in the transfer market, but net spend has substantially increased in the last two years and even more so over the summer. However, that is unavoidable if Everton are going to make a break through on the pitch.
If they did, they get could hope for more income from Europe. Manchester City have derived over €240m from this source in the last five years. Everton's admittedly disappointing performance in the Europa League should generate around €15m in 2017/18.
Accounts always contain something that is unexplained and the Swiss Ramble points to the 29 per cent increase in other operating expenses. These have gone up by £17m in the last four years, but it is not clear what they are for.
Finally, it is worth noting that the seven Premier League clubs to report their 2016/17 results so far all made a profit.
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