Five Years of Farhad

As Everton have found out under Farhad Moshiri, just being better resourced financially does not necessarily lead to better outcomes. Are fans right to be frustrated that we’ve not made the progress we ought to have after five years under his stewardship?

Paul The Esk 26/02/2021 12comments  |  Jump to last

Five years ago to the day, news began to filter out that a relatively unknown businessman, Farhad Moshiri, had purchased a 49.9% stake in Everton Football Club, acquiring all of Robert Earl’s holdings and a significant part of Bill Kenwright’s, Jon Woods’s and Arthur Abercrombie’s holdings.

“After an exhaustive search, I believe we have found the perfect partner to take the club forward,” Everton chairman Bill Kenwright said. “I have got to know Farhad well over the last 18 months,” Kenwright added. “His football knowledge, financial wherewithal and true blue spirit have convinced me he is the right man.”

Moshiri, a man of few words as we have come to know simply quoted “Bill Kenwright has taught me what it means to be an Evertonian… there has never been a more level playing field in the Premier League than now.”

His first game at Goodison was the FA Cup tie versus Chelsea in March 2016. In a short statement in the programme, he made three major forward-looking statements. Firstly he was going to provide money for the club: “additional funds for transfers and retaining our key players to ensure we have a strong core to build on in the future”. Secondly, “looking at the best options for the stadium”; and thirdly “finally and most importantly Everton is about great football and winning matches“

Thus any analysis of what has been achieved 5 years on must start with an assessment of these points, have they been achieved, have they been achieved in a timely manner and if not what are the remedies moving forwards?

If you strip away the fact that we’re looking at the performance of our football club and all the bias and prejudice that that brings (especially at Everton) we might just see an objective evaluation of his first 5 years.

Yes, Moshiri has provided huge sums of money; yes we are making progress on the stadium; and yes under Ancelotti and Brands there is evidence of a revival of our footballing fortunes. But if you cast your mind back to 26 February 2016 how many would truly say they would be satisfied if they had the knowledge that we would be where we are now and the rate of progress on all three points?

I’d wager few, and as regular readers of this site and listeners to its podcasts will know, I in particular have been and remain critical of the club’s performance.

Just by being better resourced financially does not necessarily lead to better outcomes.

Finances, the stadium and football

In 2016, football (at Premier League level at least) was booming. New increased broadcasting rights deals – football’s own version of quantitative easing, increasing commercial receipts and opportunities plus fresh waves of capital (including Chinese soft power, wealth and political endorsement). On reflection, the most benign set of economic conditions in which to operate. As a result Manchester City, Manchester United, Tottenham Hotspur, Liverpool and Chelsea in particular continued to grow their revenues and their brands, making strategic investments in assets, stadiums and their commercial capabilities. They did what all good businesses do, increase their competitive advantages in the good times.

But what of Everton?

Profit & Loss (£’000s) May
2016
May
2017
May
2018
June
2019
June
2020
Aggregate (2017-20) 
Matchday 17,625 14,064 20,159 14,183 11,942 60,348
Broadcast 82,500 130,535 133,800 132,734 97,995 495,064
Commercial/Other 21,416 26,731 35,200 40,747 75,945 178,623
Total income 121,541 171,330 189,159 187,664 185,882 734,035
Wages 83,985 104,655 145,479 159,985 164,758 574,877
Other expenses 30,428 39,184 36,829 43,127 33,069 152,209
EBITDA  7,128 27,491 6,851 (15,448) (11,945) 6,949
Depreciation 1,842 2,495 3,968 6,537 6,939 19,939
EBITA 5,286 24,996 2,883 (21,985) (18,884) (12,990)
Amortisation 22,398 37,298 66,933 95,057 99,232 298,520
EBIT (17,112) (12,302) (64,050) (117,042) (118,116) (311,510)
Exceptional costs 11,335 6,966 33,962 10,233 57,122 108,283
Profit on players 7,800 51,945 87,786 20,298 40,455 200,484
Profit BIT (20,647) 32,677 (10,226) (106,977) (134,783) (219,309)
Interest income 1,354 1,801 3,094 2,925 3,268 11,088
Interest expense 5,055 3,818 5,938 7,793 8,348 25,897
Profit before tax (24,348) 30,660 (13,070) (111,845) (139,863) (234,118)
Tax expense 0 0 (30) 6 (24)
Net profit  (24,348) 30,660 (13,070) (111,815) (139,869) (234,094)
Net assets (43,404) 123,367 91,968 160,802 70,932

Total losses of £234 million to the end of June 2020. Clearly companies lose money in the early stages of major investment – that is fully understood. Clearly, Covid-19 has impacted the 2020 figures – the accounts show £67.3 million of losses directly related to Covid-19 and of course, there’s £39 million of stadium related costs to capitalised post final planning approval at Bramley-Moore Dock.

However, how much of the losses, and indeed the expenses can be attributed to poor strategic thinking or poor execution?

Unfortunately a considerable amount both on and off the field in my opinion. Whilst many will point at Moshiri’s capital injections of £450 million over the last five years as evidence of him being a “good” owner, what of the several appalling managerial appointments? What of the ridiculous transfers and contracts offered (especially in the early years under Koeman, Walsh and even Allardyce)? What of the several iterations of Bramley-Moore (and subsequent delays)? And finally What of the lack of commercial progress?

I would argue that the poor decision making and execution have cost Moshiri a considerable amount of money, necessitating much higher capital contributions than he might first have expected – capital contributions to cover the losses arising from the decisions and also the opportunity costs of not achieving sufficient on and off the pitch.

A failure to finish higher than seventh (in Koeman’s first year) and just one year of Europa League football is a measly return on £526 million of transfers and £574 million in wages (to June 2020).

Non broadcast income performance, on the face of it, looks to have improved from £21.4 million in 2016 to £75.9 million in 2020. However, the 2020 figure includes a one off £30 million naming rights payment and at least £12 million in sponsorship payments from USM, a company still closely tied to Moshiri’s interests. I acknowledge entirely USM’s financial support of Everton to date and in the future, but objectively, stripping out the USM factor demonstrates the lack of progress in growing income. Progression from £21.4 million to ex-USM £33.9 million is far less impressive, especially against the backdrop of (until 2020) buoyant market conditions.

Of course, there is great excitement and optimism about the new stadium at Bramley-Moore Dock following Liverpool City Council’s historic decision to approve planning permission. To be fair and objective the club have performed extremely well throughout the planning process with considerable skill in handling all the various stakeholders.

However, objective analysis of the stadium might ask why the progress to this point has been so slow? Why was it so closely tied to the failed Commonwealth Games bid and the then subsequent re-design? Why did we appear to go down the local authority funding route only for that to fall aside without explanation, and finally and perhaps most importantly is the stadium compromised in capacity terms? A near 53,000 capacity seems to lack ambition when set against capacity crowds at Goodison, a current 17,000-sized waiting list for season tickets plus a considerable future demand for walk up, general admission tickets for irregular attendees and tourists/day trippers to the city? All of this before taking into account possible progress on the pitch and meeting the intent of regular European football.

My point is this: Why is Moshiri seemingly satisfied with the degree of and rate of progress in the 5 years since his arrival? Is it consistent with the three forward looking statements made when attending his first game at Goodison? Equally, if he is not satisfied, why has he not made the changes at board and executive level to increase the prospects of achieving the objectives he himself set out?

My concern, and indeed my frustration with the “5 years of Farhad” is that we’ve not made the progress we ought to have. As a result our footballing performance is only now beginning to progress under the direction of Ancelotti and Brands. The lower league positions, the lack of European football, terrible manager selections, poor transfer decisions, and opportunity costs have hurt us financially to the extent we are compromised in the transfer market with financial fair play plus profit and sustainability concerns.

For me, it’s a real mixed bag. Yes, I can see under Brands and Ancelotti we will progress; yes, the stadium at Bramley-Moore Dock is on the horizon (albeit compromised in capacity terms) but in what will be post-Covid, much more difficult operating and economic conditions, do we have the board and executive to not only steer us through these difficult waters but to out-perform our peers? The evidence to date, suggests we do not. Therefore, in order to do so, Moshiri has to make the changes necessary to improve our prospects of out performing stronger competitors. Stronger in terms of personnel, skills, and experience and stronger financially.

If our competitors remain more skilled and have greater resources, how can we out-perform them? That’s the question for Moshiri, 5 years in. No one can question his financial commitment but will he demand greater ambition and execution from the people he so handsomely rewards? Will he demand more from them or bring in replacements so that as he said “finally and most importantly Everton is about great football and winning matches“ becomes a reality?

In the next 5 years, the focus has to be on greater ambition on and off the pitch. If Moshiri can’t bring that himself, just as he did with Ancelotti and Brands on the pitch, he needs to bring business leaders to the club to achieve that which is consistent with our club motto: “Only the best is good enough”.

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Reader Comments (12)

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Paul Carr
1 Posted 03/03/2021 at 16:24:25
I tend to agree with this very objective view of the progress made over the last 5 years. The initial managerial appointments showed a lack of both football knowledge and ambition. However would a top class manager have been attracted to the club 5 years ago?
Player recruitment has only improved recently, though many would question the policy on striker back up- is King ever going to play more that 15 minutes? And why is Keen capable of succeeding at PSG but not at Everton.
Winning the FA Cup and/or a top 4 finish, both achievable, would be a huge step forward in meeting those early objectives.
Better late than never. Same with the stadium project. Many years late but we will get there soon.
Kieran Kinsella
2 Posted 03/03/2021 at 16:53:39
Paul

I disagree with your gripe on the capacity. Goodison has cheap tickets with limited views. I doubt ticket prices will be the same or less at the new stadium. I suspect some fans will find themselves priced out. Also, with increasing variability as to when games are played (Fridays, Thursdays etc) it's harder for folks to get to games and easier to say "I'll just watch on TV." The other thing is that while the waiting list sounds good, we've never averaged crowds of 60,000 even in the days when you could cram half a million standers into Wembley. If all the waiting list people got season tickets that would leave us with a couple of thousand of people without seats. That's not much of a buffer for a recession, a dip in form, a dislike of the team's style of play, or God forbid relegation.

Kevin Prytherch
3 Posted 03/03/2021 at 17:20:49
Strange how other expenses have risen in 5 years. Didn’t a certain former chairman get slated for this?
Barry Rathbone
4 Posted 03/03/2021 at 21:42:08
Not disappointed at all only Mansoor and Abramovich have transformed non-entity clubs into consistent challengers and trophy winners and that was via the foolproof blueprint of unlimited cash.

Mr Moshiri is in the peer group below of the Mike Ashley and Venkys flavour unmitigated disasters who have floundered from day 1. Our man has made mistakes but rectified by bringing in footballing illuminati like Ancelotti and Brands and is on course to deliver a spanking new stadium.

Those of us who like to apply perspective should be passing the hat round for a bronze statue of the man.

Alan J Thompson
5 Posted 04/03/2021 at 15:15:12
If Mr Ancelotti performs as he alludes, finishing "Top 4", say this year and next and manages a good run in the Champions League in one of those years, would this not see income/prize money and TV coverage to go a long way to reducing the debt, even allowing for one or two big-money signings?

It might also entice back or enhance the transfer fee for Moise Kean although there are few others we would want to lose, more likely wanting to add.

I doubt Mr Moshiri will be too concerned unless he sees a rapid decline in form that affects income.

Martin Mason
6 Posted 04/03/2021 at 17:20:07
As always a very good article Paul but I'd say that progress has been made in those intangible areas that are difficult to quantify unlike absolute results. This type of progress is an essential launch pad which necessarily precedes progress in results. I think of spirit throughout the club, depth of squad, increase in value of low value players, ability to attract better quality, etc., all of which you can't quantify the benefit but it is real. The money he has put in is truly eye watering though but he hasn't done it for nothing.
Bill Hawker
7 Posted 04/03/2021 at 19:55:53
Very good work as always, Paul. Glad you're willing to do the dirty work of digging around for all of these numbers.
Jerome Shields
8 Posted 10/03/2021 at 16:52:47
Just read your analysis and as agree totally with your conclusion. . Need a structural change in the off pitch adm management.
Stan Schofield
9 Posted 11/03/2021 at 16:23:04
Where we are is not surprising in terms of expenditure. The latter has been nowhere near that of the three elite clubs City, Utd and Chelsea, and less than the non-elite clubs Spurs, Arsenal and Liverpool. In fact, from the perspective of Cost-Benefit Analysis, we’re probably far more cost-effective than Liverpool, who’s expenditure on players in the PL era is not far below Utd’s, whilst Utd have won the PL 13 times!!

To really compete at the very top, and to do so consistently like City, Utd and Chelsea, would require a big increase in expenditure on players. This seems unlikely unless someone like Usmanov is working in the background to provide the resources.

Even then, such resources are only a necessary condition for success. They are not a sufficient condition, as exemplified by Liverpool.

Brian Harrison
10 Posted 11/03/2021 at 16:58:38
Paul,

I think if I was Farhad Moshiri I would be extremely disappointed on the return he has had for pumping in the best part of £450 million. And not only has he had a poor return so far, he will need to invest in the next 5 years even more than he has in the last 5 years to move the club to where he and us want it to be. Obviously his choices of manager have not served him well, and apart from 1 season under Martinez we have gone backwards. The problem he had from the start is he couldnt attract a real top quality manager as our record at competing in Europe or winning domestic trophies were non existent for the last 30 odd years. And without the right man at the helm of the club it was always going to be difficult to change the perception of the club which would make it more attractive to the top managers. When it was rumoured that Moshiri was after Simeone, when the press asked Simeone at his next press conference was there any truth about the rumours linking him to a move to Everton, Simeone simply asked who?

At last he has a quality manager in charge the pity is that we didnt get Ancelotti when Moshiri took over. I am sure had Ancelotti been handed a £450 million war chest to spend over 5 years we would by now be competing for a regular top 4 place and may have picked up a trophy along the way. But we have hired a top manager but because of FFP and the money needed to finance a new stadium, then Ancelotti will feel as though he is trying to achieve success with one hand tied behind his back.

Also the rumours of the extended Champions league format makes it an absolute must to be involved if Moshiri is to fullfil his dream. I know many posters on here when this new Champions league format has been put forward have suggested let them get on with it. But if the new format comes in and we are not part of it then this club will find it impossible to attract the sort of players we will need to ever hope of filling BMD.
So for me these next 5 years are way more important than the last 5 and if we get it as badly wrong as we have in Farhads first 5 years then BMD might become a noose round our neck for decades to come.

Andrew Ellams
11 Posted 11/03/2021 at 17:11:45
Brian @10, you say that Moshiri couldn't attract a top quality manager but who do we know of that he actually approached?

I know there was plenty of media rumours but most of them probably had little or no substance. The only ones I remember that almost came close were the 2 Portuguese guys who ended up in Qatar and the Ukraine instead.

Stan Schofield
12 Posted 11/03/2021 at 19:36:58
Brian@10: I don’t think there was a £450M war chest. There’s a difference between a gross spend and a net spend, and for us the latter is not £450M. For example, Lukaku and Stones were sold for a total of over £120M, and that was prior to the inflation caused by the £200M sale of Neymar from Barca to PSG.

Imagine if we had both DCL and Lukaku. That’s the level of depth that the likes of City have, and we cannot compete with it.


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