West Ham - Stadium Arcadium

Although West Ham had some trials and tribulations during the 2013/14 season, they finished up in a comfortable 13th position in the Premier League and also reached the semi-final of the Capital One Cup. In the process, the Hammers reported the highest revenue and profit in the club’s history, leading vice-chairman Karren Brady to comment, “2013/14 was a satisfactory year for the club both on and off the pitch.”

To add to the good news, the club also signed an agreement to sell their Boleyn Ground in preparation for the move to the Olympic Stadium for the 2016/17 season.

West Ham’s profit before tax of £10 million was a significant £14 million improvement on last year’s loss of £4 million, as revenue rose £25 million (28%) from £90 million to £115 million. The profit growth was almost entirely attributable to the £25 million extra income from the new Premier League TV deal, partially offset by increases in player costs: the wage bill was up £8 million, while player amortisation was £4 million higher.

The last time that West Ham managed to make a profit was £6 million in 2005/06. In the intervening seven years, they made cumulative losses of £144 million before moving into the black in 2013/14. In fairness, the small £4 million loss in 2012/13 already represented a step in the right direction, as the club had been averaging £23 million annual losses before then.

Although Brady commented, “most areas of income increased”, it is clear that the £25 million growth in 2013/14 is very largely due to the new TV deal, as broadcasting revenue rose £23.6 million (46%) from £51.8 million to £75.4 million. Match receipts increased £1.5 million (8%) from £18.0 million to £19.5 million, while commercial income was actually virtually unchanged at £20.0 million.

Since 2009, West Ham’s revenue has grown 51% (£39 million) from £76 million to £115 million. Again, the majority of this growth is down to TV money, which rose £31 Million (71%) from £44 million to £75 million, though commercial income did grow £6 million (40%) from £14 million to £20 million and match day was up £2 million (11%) from £18 million to £20 million.

The impact of relegation to the Championship is evident from the £34 million decrease in 2012 with all revenue streams being adversely impacted.

Around two-thirds (66%) of West Ham’s revenue now comes from Broadcasting, up from 58% the previous season with Match Day and Commercial both contributing 17%.

Despite significant growth, West Ham’s 2014 revenue of £115 million is still a lot lower than the Premier League elite, e.g. Manchester United’s £433 million is over £300 million higher. On the other hand, West Ham did have the 8th highest revenue in the Premier League (and indeed the 29th highest in the world) in 2012/13.

As famous investor Warren Buffett once said, “A rising tide lifts all boats”, and in this way it is clear that all Premier League clubs will benefit from the new TV deal. In fact, we already know that Everton have overtaken West Ham in 2013/14 with their revenue increasing to £121 million, largely due to Everton’s TV money increasing at a faster rate.

Although West Ham’s Premier League TV distribution rose by £25 million from £49 million to £74 million, their increase was slightly dampened by the lower league position (dropping from 10th to 13th). Everton’s share increased by £33 million, boosted by a higher finish (5th place compared to 6th the previous season) and more live televised matches (16 compared to 14). Looking forward, West Ham’s share should be higher in 2014/15 if they maintain a better league position.

Given West Ham’s enterprising start to this season, it is interesting to note how much money they might make from qualifying for Europe. Last season, English clubs in the Europa League earned an average of €4.6 million (Tottenham €5.9 million, Swansea City €4.0 million and Wigan Athletic €3.8 million), while English teams in the Champions League (an unlikely, but not impossible objective) earned an average of €38 million. On top of that, there would be additional gate receipts and higher commercial income (based on contract clauses).

This money will be even higher from the 2015/16 season when the new Champions League deal commences. UEFA recently told the European Club Association that clubs could expect a 30% increase in revenue, but the uplift may be even higher for English clubs, as BT’s exclusive acquisition of UK rights is apparently double the current arrangement.

Match Day receipts rose 8.5% (£1.5 million) from £18.0 million to £19.5 million. Even though the average league attendance fell 2% from 34,720 to 34,007, match day revenue still rose in 2013/14, largely due to season ticket price rises plus money from the Capital One Cup run.

West Ham’s match day revenue of £20 million is a long way short of leading clubs, e.g. both Manchester United and Arsenal generate more than £100 million, though a more reasonable comparative might be Tottenham, who earn twice as much (£40 million) as the Hammers.

This weakness should change with the move to the Olympic Stadium for the 2016/17 season, which is a major financial coup for West Ham. Even though the total cost of the stadium is more than £600 million, the club will only pay a once-off fee of £15 million for stadium conversion plus an annual rent of around £2.5 million. Note: the accounts include Olympic Stadium project costs in Exceptional Items: 2013/14 £0.5 million, 2012/13 £1.4 million.

This will create a number of commercial opportunities, including premium hospitality packages, where Brady has stated, “we will not have enough seats to fulfill demand.” That said, it will be interesting to see whether the club will be able to fill the 54,000 capacity stadium, but there should certainly be an increase in revenue.

Commercial revenue was essentially unchanged at £20 million. Even though retail and merchandising rose 3% (£0.2 million) to a record high of £6.3 million, other commercial activities fell 2% (£0.3 million) to £13.7 million.

Even though Brady proudly proclaimed that West Ham are “officially recognised as one of the world’s leading football brands by Brandfinance, placing us again in the top 9 of Premier League clubs in the world’s most valuable football brands”, the fact remains that their commercial income pales into insignificance compared to heavyweights such as Manchester United, who generate £189 million from this activity. That comparison might be unfair, but it is worth noting that Tottenham earned £45 million and Aston Villa £25 million (in the 2012/13 season).

West Ham’s shirt sponsorship with global foreign exchange broker Alpari is worth £3 million a season for three years until the end of the 2015/16 season. This is more than they earned from their previous sponsor SBOBET, who were signed in the 2008/09 season (on a reduced fee) as a replacement for XL.com, who went into administration and defaulted on their sponsorship. The club’s kit supplier deal is with Adidas, who replaced Macron in 2013, until the end of the 2014/15 season with a value estimated at £2 million a year.

Given the greater exposure afforded by the Olympic Stadium, the value of the next deals for shirt sponsor and kit supplier should both be considerably higher.

Wages rose 14% (£8 million) from £56 million to £64 million, but the wages to turnover ratio improved from 63% to 56%, the lowest ratio “since this was first calculated 15 years ago”, following the 28% revenue growth. Interestingly, wages have actually fallen £3 million (4%) since the peak of £67 million in 2009, while revenue has increased by £39 million in the same period.

The amount paid to the highest paid director, believed to be Brady, fell from £1.6 million to £636,000 in 2013/14, presumably as last season included a hefty bonus for securing the Olympic Stadium.

West Ham’s wage bill of £56 million was only the 14th highest in the 2012/13 season, almost exactly in line with their league placing the following season. Even though this has increased to £64 million, to place this into context, it is around a third of the two Manchester clubs (United £215 million and City £205 million), while Arsenal’s wages are over a £100 million higher at £166 million.

West Ham’s improved performance on the pitch should perhaps be no surprise, given the recent “major investment in the first team squad”, as evidenced by the increased activity in the transfer market. In the decade up to the 2011/12 season, West Ham was somewhat of a trading club with a net spend of zero, but they have significantly ramped up their purchases in the last three seasons with a net spend of £67 million.

In 2012/13 West Ham spent big on Matt Jarvis, then bought Andy Carroll and Stewart Downing at the start of the 2013/14 season before really motoring this season, purchasing Enner Valencia, Cheikou Kouyate, Diafra Sakho, Aaron Cresswell, Morgan Amalfitano and Mauro Zarate. In addition, the club has also made good use of the loan market, bringing in Alex Song from Barcelona and Carl Jenkinson from Arsenal.

In fact, over that three-year period, West Ham were the 6th highest net spenders in the Premier League, only beaten by those clubs that manager Sam Allardyce frequently refers to as “the big boys”: Manchester United, Chelsea, Manchester City, Liverpool and Arsenal.

This spending spree has been financed by the owners, David Sullivan and David Gold, putting in more money as shareholder loans, which have increased to £49 million. This is over half of the club’s gross debt of £92 million, leaving £42 million of external debt and £0.6 million of debenture loans under the Hammers Bond Scheme.

Although net debt fell £4 million from £78 million to £74 million, gross debt actually slightly increased £1 million from £91 million to £92 million with the net fall being driven by the £5 million rise in cash balances from £13 million to £18 million. Since 2010 gross debt has more than doubled from £45 million to £92 million, but external debt is down £2 million with the growth funded by the club’s owners as their loans have increased by/to £49 million.

External debt includes bank loans of £26.7 million with interest charged at 3% over LIBOR, which have been refinanced until December 2016, though the club has repaid £5.5 million after the 2013/14 accounts were finalised, and a short-term facility with Vibrac, an offshore loan corporation, secured on Premier League TV money. This arrangement was renewed for a further year for £18 million in August 2014 after the previous £15 million loan was repaid.

Karren Brady has stated that any outstanding bank debt that is secured on the club’s ground has to be repaid before the move to the Olympic Stadium. She hopes that the proceeds from the sale of the Boleyn Ground to Galliard Homes will cover the £15 million conversion fee plus “some of our bank debt”. Given current repayment patterns, this should be down to less than £20 million at that time, as this will not include the Vibrac loan. Incidentally, the owners’ loans are unsecured subordinated to the secured bank loan.

According to the profit and loss account, West Ham’s net interest payable of around £5 million is among the highest in the Premier League, albeit considerably lower than Manchester United and Arsenal. However, the cash payment is only £2 million, as the interest on the owners’ loans (6-7%) will not be paid or added to the loans until the loans are repaid. Accrued interest currently stands at £6.3 million.

Sullivan and Gold have now invested a total of £75 million into the club, including £3.5 million in 2013/14 “to allow the manager to go into the transfer market to cover our injury crisis and buy the emergency players we needed to secure our Premier League status.” The owners invested £24 million into the club during their first year in 2009/10 and, importantly, £32 million in the form of loans in 2011/12 to cover the revenue reduction in the Championship. Sullivan and Gold now own 86.2% of the club.

Of course, much of the increase in profitability is due to the Premier League’s new Financial Fair Play legislation, which ensures that the majority of the increased money from the new TV deal remains within the club and does not simply go to higher player wages (and agents’ fees), as has invariably been the case with previous increases. In summary, top flight clubs cannot make a loss in excess of £105 million aggregated over a three-season period between 2013 and 2016 and the amount of money clubs can spend from the new TV deal on wages is restricted.

Specifically, clubs whose player wage bill is more than £52 million will only be allowed to increase their wages by £4 million per season for the next three years. However this restriction only applies to the income from TV money, so any additional money from the higher gate receipts, new sponsorship deals or profits from player sales can still be spent on wages. Although Allardyce was worried that this might prevent the purchase of Andy Carroll, this turned out not to be the case.

Although it will be a wrench to leave the atmospheric Upton Park, there is little doubt that the club has secured a great deal at the Olympic Stadium. Brady enthused about its “enormous commercial and brand opportunities” and promised “a strategy to deliver sell-out crowds”. That will depend to some extent on how the team is performing on the pitch. While Allardyce’s side has played some enterprising football this season, only time will tell whether this can be maintained, allowing the club “to deliver much more in years to come” (to once again quote Brady).

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Manchester City - Roll With It

Manchester City's 2013/14 season was described, with some justification, as “another memorable year” by its chairman, Khaldoon Al Mubarak, as City won their second Premier League title in three years. They also added the Capital One Cup, which meant that the club has now won every major domestic competition at least once in the last four seasons.

The strategy off the pitch is also delivering, as City’s revenue surged through the £300 million barrier, rising 28% from £271 million to £347 million, while it further reduced losses for the third consecutive year. All three revenue streams contributed to this strong performance with broadcast revenue up 51%, match day revenue up by 20% and commercial revenue up by 16%.

The 2013/14 loss was more than halved from £52 million to £23 million. In fact, the club would have been very close to break-even without including the £16 million settlement with UEFA over disputed breaches of its Financial Fair Play (FFP) regulations and it expects to be profitable in 2014/15.

The £29 million decrease in the 2014 reported loss was mainly driven by a £39 million increase in TV money from the new Premier League deal, further growth in commercial partnerships of £23 million, a reduction in the wage bill of £23 million, which was partially offset by once-off movements such as the £16 million FFP settlement and £46 million of intellectual property sales in 2013.

Two encouraging items are worth noting: (a) the growth in EBITDA (Earnings Before Interest, Depreciation and Amortisation), which more than doubled from £36 million to £75 million; (b) the fact that City’s 2014 figures include virtually nothing from player sale profits, so there is likely to be future upside from this activity.

City’s 2012/13 numbers were boosted by £48 million of Other Operating Income, which was derived from the sale of intellectual property (£22.5 million to subsidiaries and £24.5 million to third parties). These have not been repeated in 2013/14; in fact, there have been £10 million of “recharges for costs incurred providing services for the benefit of the company”.

The last time that City made a profit was back in 2006 (£10 million). Since then they have reported a total of £628 million of losses, but, as technical analysts are prone to say, “the trend is your friend”, and City’s losses have been steadily reducing since the £197 million registered in 2011. Effectively, the losses have been halving each year.

After years of heavy spending in order to build a squad and the facilities required to compete at the highest level, City can now look forward to future profits with some confidence. The owners’ “Masterplan” appears to be firmly on track, as confirmed by Al Mubarak, “Today our club is where we hoped it would be when we began this transformation six years ago.”

Since 2009, City’s revenue has increased by around 300% (£260 million) from £87 million to £347 million, mainly driven by more commercial partnerships, up by an astonishing 821% (£148 million) from £18 million to £166 million. Broadcasting is also substantially higher, rising from £48 million to £133 million, including £31 million from the Champions League, while match day income has more than doubled from £21 million to £47 million.

Revenue grew £76 million in the last season alone, rising from £271 million to £347 million. All three revenue streams contributed: broadcasting up £45 million (51%) from £88 million to £133 million, commercial up £23 million (16%) from £143 million to £166 million and match day up £8 million (20%) from £40 million to £48 million.

This growth represents the best performance of the top four English clubs (in revenue terms) in 2013/14, both in absolute terms (£76 million) and percentage (28%). United’s absolute growth was almost as much (£70 million), while Chelsea and Arsenal both increased by 23%.

City now have 48% of their revenue coming from commercial activities, which is a higher proportion than any other leading English club, e.g. it’s 44% at United and 26% at Arsenal. Their remaining revenue is split 38% broadcasting and just 14% match day.

City’s 2013/14 revenue of £347 million is the second highest in England, behind United’s £433 million, but ahead of Chelsea £320 million and Arsenal £299 million.

Last year City were 6th in the European Money League with £271 million, which is a notable achievement, but still a long way behind the Spanish giants, Real Madrid £445 million (gap £174 million) and Barcelona £414 million.

Depending on PSG’s revenue, City will be either 5th or 6th in the new edition of the Deloitte Money League, though the gap is closing, partly due to the underlying growth and partly due to exchange rate movements. For example, Real Madrid’s 2014 revenue of €550 million equates to £440 million, so the gap to City has reduced from £174 million to £93 million.

Winning the title in the first year of the new Premier League three-year television deal helped City increase their distribution by £39 million (66%) from £58 million to £97 million. Interestingly, this was £1 million less than second-placed Liverpool received, as the Reds were shown live more often than City, leading to a higher facility fee. Nonetheless, the increased revenue arising from each Premier League deal is clear to see, rising from £21 million back in 2007.

City also received £31 million (€35.4 million) from the Champions League, which was £7 million higher than the previous season’s £24 million (€28.8 million), as they progressed further (to the last 16) and performed better in the group. City’s share of the UK market pool is dependent on how far they progress (compared to other English clubs) and their finishing place in the previous season’s Premier League. This means that 2014/15 Champions league revenue should be higher, as City won the Premier League in 2013/14.

Incidentally, some teams from other countries benefit from a high market (TV) pool, divided by fewer clubs, a good example being Juventus who received €32 million from the Italian market pool in 2013/14.

City’s commercial revenue rose 16% to £166 million in 2013/14. As Al Mubarak drolly commented, “commercial success has never been an afterthought for Manchester City.” Much of this is linked to Abu Dhabi, where the club’s ownership is based, but it is also true that the number of commercial partners has greatly increased to 35 (UK and global 25, regional 10), 133% more than the previous season.

Chief Executive, Ferran Soriano added, “The establishment of the City Football Group, with clubs in the United Kingdom, United States, Australia and Japan, has expanded the commercial potential of the organisation and has already facilitated global partnerships with companies such as Nissan, Etihad and Hays.”

Nevertheless, the club is still a long way behind Bayern Munich, whose commercial revenue increased to a barely credible £233 million last season, under-pinned by lucrative contracts with their own “triple A” investors, Adidas, Audi and Allianz. PSG lead the way in 2012/13, as their commercial revenue of £218 million was inflated by a €200 million partnership with the Qatar Tourism Authority.

Despite City’s commercial progress, they have slipped further behind Manchester United, whose £189 million is £23 million above City’s £166 million – and that’s before United’s hefty new deals (Chevrolet from the 2014/15 season and Adidas from the 2015/16 season). However, City are a long way ahead of Liverpool £98 million (admittedly the 2012/13 season) and Arsenal £77 million (before the PUMA kit deal, starting in 2014/15 season).

City’s largest commercial deal is with Etihad, which is understood to be worth £400 million over 10 years, covering shirt, stadium naming rights and campus. Of that, it is estimated that the shirt sponsorship accounts for £20 million a season, which would put City’s deal behind United’s Chevrolet agreement £47 million ($70 million) and Arsenal’s Emirates deal £30 million.

There has been press speculation that the Etihad sponsorship deal will be extended for a further five years, bringing in an additional £320 million. Given that three years of the deal have already elapsed, that would imply an annual payment of £50 million going forward.

In addition, it is understood that City will sign a further five-year deal with three partners for a total of £80 million to sponsor their new training complex, including the splendid new 7,000 capacity stadium for reserve and academy matches.

There is room for improvement with City’s kit supplier deal with Nike, which is worth £12 million a season. Although this six-year deal, signed in 2013, doubled City’s revenue compared to the previous Umbro agreement, it is now well behind other clubs’ latest deals: United £75 million (Adidas), Arsenal £30 million (PUMA) and Liverpool £25 million (Warrior).

Even though City’s match day revenue rose by 20% to £48 million, this is still less than half the money generated by United and Arsenal (both over £100 million), despite the average attendance at the Etihad Stadium of 47,091 being the highest in the club’s history and all 36,400 season tickets being sold out. The other side of the coin here is that City have the cheapest season tickets in the Premier League at £299.

City are extending the stadium to take the capacity up to 55,000 in advance of the 2015/16 season and they also have received planning permission for potential further expansion up to 61,000.

City reduced their wage bill by 12% (£28 million) from £233 million to £205 million. Allied with the steep increase in revenue, this reduced the wages to turnover ratio from 86% to a healthy 59%.

The magnitude of the reduction has raised a few eyebrows, especially as the number of football staff has been slashed from 222 to 112. This is essentially due to a group restructure, where some staff are now paid by group companies, which then charge the club for services provided.

This is undoubtedly an example of fancy footwork with some people accusing City of finding a device to get round FFP restrictions. There is likely to be a net reduction, as some of these costs will be shared among group companies, but it is difficult to believe that UEFA will not have access to the full details, so could make a judgment whether this treatment is reasonable. In any case, many of these costs will simply be booked elsewhere in City’s accounts, i.e. external charges have risen £17 million from £42 million to £59 million in 2013/14. Furthermore, it is likely that the majority of that headcount reduction refers to lower-paid staff.

In addition, there are a couple of other underlying reasons to explain the year-on-year reduction: (a) the 2012/13 figures included compensation paid to Roberto Mancini and his coaching staff – which other clubs usually report under exceptional items; (b) Soriano has renegotiated a number of contracts with a lower basic salary, but higher bonus payments.

Whatever the rights and wrongs of City’s reported wages, they have been overtaken by United, whose wage bill rose to £215 million in 2013/14. However, they are still around £40 million higher than Arsenal £166 million, while Chelsea are still to report wages for 2013/14 (£173 million in 2012/13). It should be noted that one of the clauses in UEFA’s FFP settlement states that City cannot increase their wage bill during the next two financial periods (2015 and 2016) – though performance bonuses are not included.

Interestingly, despite last season’s reduction, City now have the second highest wage bill in Europe with €256 million, ahead of both Real Madrid €250 million and Barcelona €248 million. Much of this is due to the exchange rate used (this calculation is based on the 1.25 rate that Deloitte are likely to use in their 2014 Money League) and it also depends on how clubs account for things like image rights, but it does make you think.

City have spent (net) over half a billion in the transfer market since 2007/08, but there has been a noticeable slowdown in player investment in the last few seasons. Up until 2011/12, the club spent £415 million, averaging £83 million a season, but this has reduced to £128 million in the last three seasons, halving the average annual spend to £43 million.

In fact, they have been outspent in the last three seasons by both United £231 million (around £100 million more) and Chelsea £137 million. It’s a whole new ball game at City, as their desire to curb their expenditure has also been impacted by FFP restrictions. They agreed with UEFA that they would “significantly limit spending in the transfer market for seasons 2014/15 and 2015/16”, including a €60 million limit (net) for the 2014 summer transfer window.

On top of that, their squad size for UEFA competitions has also been limited to 21 players (23 were registered in 2013/14), which, according to manager Manuel Pellegrini, was the key factor behind the departure of striker Alvaro Negredo to Valencia.

Either way, the reduced transfer activity resulted in player amortisation (the annual cost of writing-off transfer fees) falling from £81 million to £76 million.

Unsurprisingly, City have zero financial debt, though official gross debt figures include £67 million of finance leases, i.e. future obligations under the Etihad Stadium lease. However, there are £101 million of contingent liabilities (up from £54 million in 2013) for additional transfer fees, signing-on fees and loyalty bonuses that will become payable upon the achievement of certain contractual conditions.

Since his arrival in 2008, Sheikh Mansour has invested £1.1 billion into Manchester City in six years, either through new loans or issuing new share capital. Any outstanding owner loans were converted into equity in December 2009.

One of the most important issues for Manchester City has been FFP. Although the club believed that it had complied with these regulations, there was “a fundamental disagreement between the club’s and UEFA’s respective interpretations of the FFP regulations on players purchased before 2010.” Basically, the club thought that it would have been able to exclude £80 million of such costs from its break-even calculation, but this was not allowed, as the break-even deficit in 2011/12 was not entirely due to pre-June 2010 player contracts. The difference was negligible, but this meant that the entire £80 million could not be utilized.

Although City felt that the goalposts had been moved after the game had started, notably due to a 2013 change in UEFA’s guidance notes, they decided to draw a line under the matter and not contest the ruling in the courts. They were fined €60m (£49 million) of which €40m (£33 million) was suspended, assuming that the club follows the other measures, leaving €20m (£16 million) booked in the 2013/14 accounts.

This must have been particularly galling, given that PSG were fined the same amount, despite a lot more substance to City’s activities. Interestingly, UEFA did not rule against City’s Etihad deal, on the grounds that it was not a “related party transaction” and was therefore permitted.

City have also specific allowances for FFP losses of €20 million in 2013/14 and €10 million in 2014/15, as opposed to the cumulative allowance of €30 million over those two seasons for all other clubs. In practical terms, this is unlikely to have much effect on City, as their 2013/14 loss can exclude infrastructure costs and the £16 million FFP settlement, while they plan to be profitable from 2014/15 onwards. Indeed, Soriano said that the club expected to enter the 2015/16 season with “no outstanding sanctions or restrictions.”

That said, the measures restricting the net transfer spend and the wage bill must be influencing City’s approach to some extent when bidding for the top players.

Soriano concluded that City had reached “a new level of financial sustainability” in 2013/14. Given the extensive discussions that City had with UEFA when reaching their “compromise” settlement, it has to be considered likely that the club's FFP problems should now be behind them – always assuming that the team continues to perform on the pitch, especially qualification for the Champions League.

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Everton - Blue Sky Mining

In his first season as Everton’s manager, Roberto Martinez delivered an excellent performance with his side finishing fifth in 2013/14 and therefore qualifying for the Europa League. The club fared no less well off the pitch, as Everton registered a record profit of £28 million on a record turnover of £121 million, which enabled them to significantly reduce their net debt from £45 million to £28 million.

Profit increased by £26 million from £2 million to £28 million, mainly driven by more money from the new Premier League TV deal £33m and profit on player sales being up £13 million (Marouane Fellaini to Manchester United, Victor Anichebe to WBA and Nikica Jelavic to Hull). This was partly offset by growth in wages of £6 million, player amortisation £8 million and other expenses £5 million.

Even though Everton managed to make a small profit in 2012/13, this was largely due to profit from player sales, so they still recorded an operating loss of £10 million that year. However, what is particularly impressive about this season’s figures is that they have succeeded in turning that around, making an operating profit of £5 million even before player sales.

The £28 million profit would have been even better without £5 million of interest payable (up from £4 million the previous year) that was required to service the securitized debt and the bank overdraft. Although nowhere near as much as the interest paid by the likes of Manchester United and Arsenal, this certainly does not help the club’s finances.

However, it is fair to say that Everton’s financial performance has been improving. Up until the last two years’ profits, Everton had been consistently loss-making. In fact, they only managed to record a meaningful profit once in the previous eight years – and that was only due to Wayne Rooney’s big money transfer to Manchester United in 2004/05. Since the sacrifice of their youthful prodigy, the club suffered £45 million of cumulative losses between 2006 and 2012 before they found a solution to their financial woes – or, perhaps more accurately, Sky/BT signed a new television deal.

Since 2009 Everton’s revenue has grown by 51% (£41 million) from £80 million to £121 million. Not bad, but virtually all of this is due to the Premier League TV deal (£40 million). Commercial revenue has only risen by £4 million in the same period, while gate receipts have actually fallen £3 million.

That said, Everton’s  revenue was up 39% (£34.1 million) in the last season from £86.4m in 2013 to £120.5m in 2014. Broadcasting rose 59% (£32.8 million) from £55.7 million to £88.5 million, while gate receipts grew 11% (£1.9 million) from £17.5 million to £19.3 million. Commercial income fell 4% (£0.5 million) from £13.2 million to £12.7 million.

Everton’s revenue mix shows their reliance on Premier League TV money: broadcasting 73% (up from 65% in 2013), gate receipts 16% and commercial 11%. This is by no means unusual in England’s top division, but it does highlight the strategic areas of focus for the Everton Board.

Despite significant growth, Everton’s 2014 revenue of £121 million is still a lot lower than the Champions League elite, e.g. it is less than a third of Manchester United’s £433 million. On the other hand, Everton did have the 9th highest revenue in the Premier League in 2012/13, which is pretty good, particularly if you consider that they have consistently outperformed their revenue level, e.g. finishing two places above United last season despite all their rival’s riches.

All Premier League clubs will obviously benefit from the new TV deal last season, but we already know that Everton have overtaken West Ham in 2013/14 after the Hammers announced their results, largely due to Everton’s TV money increasing at a faster rate.

In this way, Everton’s Premier League TV distribution increased by £33 million from £52 million to £85 million in 2013/14, while West Ham’s share only increased by £25 million (£49 million to £74 million). As well as the new deal, Everton’s share was boosted by a higher finish (5th place compared to 6th the previous season) and more live televised matches (16 compared to 14).

Everton’s 2014 gate receipts were up £1.8m from £17.5m to £19.3m with average league attendances rising from 36,356 to 37,732. Encouragingly, the number of season ticket holders increased by 1,000 to 25,000 (following a 2,000 rise the previous season). This was partly due the club’s laudable initiative of low price (£95) season tickets for junior school children.

Nevertheless, match day revenue is still very low at Everton compared to the leading clubs with Manchester United and Arsenal both generating more than £100 million a season. No wonder that chief executive Robert Elstone has stated that a new stadium “remains a big priority”.

In fact, Everton have confirmed that they are looking at a new 50,000 stadium in Walton Hall Park, though supporters will be cautious, given how the “Destination Kirkby” project collapsed in 2009. It is also believed that the club would require support from the local council in the same way that Manchester City’s move to the Etihad Stadium was facilitated.

Although Everton announced that sponsorship, advertising & merchandising revenue was up £0.8 million to £8.4 million, total commercial revenue was actually down £0.5 million from £13.2m to £12.7m. This is mainly due to other commercial activities that were down £1.1 million from £4.4 million  to £3.3 million, because 2013 included a UEFA payment for players who participated in 2012 Euros.

Although Everton have improved their commercial operations in the last few years, the revenue remains on the low side at £13 million. To place that into perspective, this is less than a third of Tottenham’s £45 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 much lower than it would be if these activities were still in-house (estimated at around £7 million) and there are signs of improvement on the commercial side.

In March 2014 Everton extended their shirt sponsorship with Chang (for the fourth time) for three years. The deal is worth £16 million, so produces £5.3 million a year (compared to £4 million from the previous deal).

A month earlier, Everton announced a new kit supplier deal with Umbro, replacing Nike from June 2014. The previous Nike deal was worth £3 million a season, while Umbro’s is understood to be a club record for such a deal. Although the figures have not been divulged, some reports suggest that it might even have doubled to £6 million, though this will not become clear until this season’s results are announced.

Everton’s wage bill was up 10% (£6 million) to £69 million (2013 £63 million), but the wages to turnover ratio fell from 73% to a respectable 58% following the high revenue growth. The ratio would be even lower if the club had not outsourced its retail and catering business.

Everton’s ability to outperform their financial resources is further emphasised by their relatively low wage bill, which was only the 10th highest in the Premier League in 2012/13, even behind QPR and Fulham. To place it into context, it is less than a third of the two Manchester clubs and less than half of Arsenal, Chelsea and (probably) Liverpool.

For the last few seasons Everton have been a selling club, basically having to sell one big name every season: Andy Johnson £10.5 million 2008/09, Joleon Lescott £22 million 2009/10, Mikel Arteta £10 million 2011/12, Jack Rodwell £15 million 2012/13 and Marouane Fellaini £27.5 million 2013/14. In this way the club recorded net sales of £35 million in the five seasons until 2013/14.

However, that certainly changed this summer with the big money (£28 million) acquisition of Romelu Lukaku from Chelsea, which nearly doubled Everton’s previous record purchase (Fellaini at £15 million), plus Muhamed Besic for £4 million and Gareth Barry for £2 million. Bizarrely, it has not (yet) lead to an upsurge in the club’s fortunes on the pitch. As they say, it’s difficult for a leopard to change its spots.

The recent change in approach in the transfer market has been reflected in player amortisation (the annual cost of writing-off transfer fees), which rose by 75% (£8 million) from £11 million to £19 million in 2013/14. And this is before the Lukaku purchase, which will only be included in the 2014/15 figures.

Everton’s 2014 net debt was down £17 million to £28 million (2013 £45 million), but this is largely due to cash balances of £21 million, which were up £18 million. In fact, gross debt of £49 million was actually up £1 million, so those interest payments will continue to haunt the club for a while.

In fairness, the club has managed to hold the gross debt at the £48-49 million level for the last five years after it more than doubled from £20 million in 2005, when Elstone explained, “our pursuit of success has stretched our finances.” The result of this strategy is clear to see, as the club is burdened with a 25-year loan from Bear Sterns (now at £22 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. Other loans include a £21 million loan securitized on Premier League TV money at 8.8%. This is renewable in August 2015, but is probably not a concern, given that it has been renewed for a number of years.

Everton’s chief executive, Robert Elstone, commented, “Our financial results highlight growing revenues, costs remaining under control and debt reducing, and when we combine that solid financial base with a playing squad that continues to improve and increase in value, we have every right to be confident and positive on future prospects.”

That’s fair enough, though it is somewhat ironic that Everton’s stronger performance off the pitch has not been mirrored (to date) in the Premier League this season, though injuries have clearly played a part in that. There is also the nagging concern that young talent, such as Ross Barkley and John Stones, will still be sold off at some stage. Maybe. In any case, Everton can at last begin to see some blue skies, at least from the financial perspective.

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