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Joe Beardwood: A response and other views

By Phil Roberts :  02/08/2007 :  Comments (3) :

I do feel some response is needed to Joe Beardwood’s article last week. I will assume the summary at the start is the work of the ToffeeWeb team, as I make the difference in our financial performance to be £28.3m not £38.3m, but we are only talking £10m and what is that between friends?! I will also say that even though I am an accountant, I have spent my life making factories run efficiently and not pouring over financial statements. So Joe probably knows a lot more about this than I do.

But what do I conclude

  • In the first 4 years of Kenwright we traded at a loss of £6m but in the last 4 years we have generated profits of over £16m. Perhaps we give credit for turning around the business and getting rid of the errors/waste/inefficiencies of the Johnson era?
  • We have earned £52m through sale of assets. I can only assume that this is sales of fixed assets (land & buildings) and human assets (Ball, Jeffers and Rooney plus others)
  • We have paid just over £16m in interest charges over the 8 years.
  • We have charged £85m to the accounts for players we have signed. Accounting rules say you have to charge to the accounts the cost of a player over the life of the contract they have signed. So therefore there should be no charge in the future for the likes of Yobo, Cahill, Arteta who have all signed new deals but their transfer fee has already been written off.

If we have written off £85m, then we must have spent more than £85m as we should still have most of Johnson and Lescott to charge in the next few years. I would love to know where we spent the £85m and on whom — but that is what is shown in the accounts. So for those who worry about our spending, this is fact.

So if we summarise, we paid into the bank the £10m in profit, we paid out £16m in interest charges and we have paid out net £33m (£85-£52) on players. That means we have paid out £40m, but the debt has supposedly only increased from £20m to £45m so that is a missing £8m. That can be explained – but those who know, will understand – the rest perhaps will switch off! Basically, just because we have charged £85m to the accounts, we may not have physically paid out the readies as we could have £8m more of payments not written off in 2000 than we have now (The “Walter you have £20m to spend” spree of Mattarazzi, Dacourt etc.) OK, switch back on now!

So where does it leave us? Well, I would suggest in a far better place than most except in one crucial area. I would love to see the same set of figures for Chelsea, Liverpool, Newcastle, Portsmouth, Villa, West Ham, and even United. I am convinced they would be significantly worse except that in all those cases there is some rich guy/consortium willing to bank roll the business in the hope that at some stage in the future they will get their money back and more. Some may be in for the fun of it – afterall, Abramovich could write off the losses at Chelsea in the way you and I would give a fiver to a nephew who has come to visit.

So that then leads us to the new director, Robert Earl. All he has done is bought the share of Paul Gregg. Everton made no money out of that deal. So a new investor is only good if they pump in millions to the club like the new owners of the clubs listed above. Jack Hayward is selling Wolves to Steve Morgan for nothing so Morgan can add £30m to McCarthy’s fighting fund. Therefore we come to the question we don’t want to ask. Who do we want owning OUR club.

Given that Bill and the rest of the board are not the “rolling in money” types, then they are not in the position to divvy up the money. Given that we, as a bunch of supporters, are not prepared to trust the guys in charge and pay £50 a ticket etc. etc. so that they club makes another £15m a year profit to spend on players and their wages (we think they would not spend it correctly and afterall isn’t it their job to fund this club, they own it and they are rich and we aren’t, it is just our club as we are the supporters). That only leaves two solutions. First is – borrow even more, and hope that success in more and more profitable high exposure football will bring in the profit to more than pay for the higher interest cost. I am sure that could be a strategy, but should we try it? (I think you get the sarcasm here!). The second solution is Bill to sell to the club to some rich guy – and given that no-one (like a Steve Morgan) has appeared on the horizon in the last 6 years to buy their beloved club – then it has to be assumed that the future buyer is not a blue, never has been a blue, and just wants to own an English Football Club and we were available.

Now, there could be those who think Bill is on an ego trip (probably) and in it to see what he can earn. Somehow, I do doubt the latter. Yes, I am sure he gets the delight we would all get from owning the club, but I really don’t believe he is fattening it up for a sale so he can make a huge profit, and at the same time taking huge amounts of money out the business to fund his next West End show. So given that the guy’s motives are the same as ours (if we were in the same position) then what do we want? A rich guy who has the club – maybe for what he can get out of it – or the current board and we continue to struggle financially.

The other problem faced by BK is control. I believe he owns just over 50% of the club's shares (I am sure someone will correct this figure). So one way to strengthen the club is to bring in more money for a share of the club and I believe legally, all existing shareholders have to have the opportunity to invest the same proportion into the club. At that point, it is almost certain Bill’s ownership would fall below 50% of the club and now a group not including Bill, could decide how to run the club. So the question, are you ready to gamble that those who maybe do not have Everton FC at their heart would not open the club up for a takeover? If this new group decides to make us a PLC and then someone buys the PLC (like a Glazier) then they cannot be stopped. We have to assume with the Bill regime, the club will stay “in the family”.

So perhaps the big question from the Shareholders Association at the AGM (and maybe the rest of the supporters who are not shareholders but would be happy to loan the club the odd grand interest free for the rest of our lives), is how can we all get together, raise £30m from 30,000 shares and sink it into the club and make sure that the control is still with people who have royal blue blood and can name the 1966 cup final team (West, Wright, Wilson, Gabriel, Labone, Harris, Scott, Young, Trebilcock, Harvey, Temple – do I qualify?)

And finally, accounting is an art not a science. Joe, if I have something wrong, apologies and it goes to show I didn’t spend enough time analysing accounts.

Reader Comments

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Neil Pearse
1   Posted 04/08/2007 at 07:37:45

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Thanks Phil for a fine piece of analysis, and some provocative conclusions.

I think we can all agree (especially after this summer’s embarrassing transfer window) that Bill Kenwright and the current board do not have enough money to fund a modern Premiership football team. Whatever way you look at it, as a majority owner Bill has to go.

We would all love to have found a true blood Evertonian to take over our club, but that is not looking at all likely. So the fact is we are probably going to see some probably foreign investor who wants a part of the richest football league in the world, and sees Everton as his best remaining vehicle.

It is something of a mystery why Everton have not already been snapped up (large crowds, history, some good players on the books, Europe etc.).

Two possibilities have been raised. One is that BK has ’turned them away’ to maintain control. This in my opinion is almost certainly not true. As we notice all around us with other clubs, big new investors tend to announce themselves rather publicly, not go creeping to the existing owners. Bill can say he won’t sell; but a new investor can kick up a stink, as well as making Bill a financial offer he would find it hard to refuse. (By the way, those who claim that Bill is (a) greedy, and (b) in it for the control, can’t really have it both ways.)

The second more likely possibility is that no-one has found us financially attractive to buy. This seems more likely, but I would love to hear others’ views on the reasons for this. I could imagine: being in Liverpool vs. London; relatively high debt levels (but is this true?); and the obvious need to spend a lot of money on building a new ground.

Given the obvious financial attractiveness of the Kirkby deal (Tescos and Knowsley paying for most of it), if I were a new investor wanting to own Everton, it would make all the sense in the world for me to sit tight until that deal was done, and then come in to buy the club. Bidding beforehand would obviously risk the new investor being asked to put his hand in his own pocket to fund more of Kirkby (no point asking Bill for more - he hasn’t got it).

One conclusion I draw from all this (Kirkby No’s take note please), is that voting Yes to Kirkby is more likely to get us the new investor we need than voting No.

Vote Yes - stadium settled, big investors already (Tesco, Kmnowsley), manageable levels of debt projected, nice historical football club to buy with large-scale support and a nice new shiny stadium on the horizon. (Obviously I don’t believe that Everton will lose support if we move to Kirkby. I assume family loyalties and success on the field
drive support far more than location five miles here or there.)

Vote No - no stadium sorted, no way of funding it, any new investor facing a much bigger bill to build the stadium, masses of financial and management uncertainty for the club. Terry Leahy and Knowsley take their money away, still no new investor, and Goodison still crumbling. This is truly the nightmare scenario for our football club.

I may well be being optimistic, but voting Yes for Kirkby could well get us both the new ground and the new owner that we need. Certainly with more likelihood than voting No.
robert carney
2   Posted 04/08/2007 at 12:07:41

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Thanks Phil; good article and a reaoned response by Neil which I disagree with totally.

If you think Kirkby is the only option write to KEIOC for the excellent report (38 pages long)on the re-devolopment of Goodison.

It would be completed in four stages starting with the Park End.

It has also been costed for the first stage at approximately £1450 per seat. As Phil mentions earlier this could be raised by a new call for shares.
I would go one further and ask the fans of the peoples club to pay for a lifelong lease of their seats with a return in the futureof the value to the family. Remember Newcastle, I certainly do, this can be sorted out by any legal dept.

There are many ways to attract investors, we do not have the facts to hand what the present board have done.
I do know that LFC prostituded themselves around the world to attract investors. We know publicly three of them, The middle easterners, the yanks and the new owner of Man City.

The deal of exclusivity has blocked outside interest in Everton. Why put all your eggs ino one basket? I would love to know.

I also know Tesco are a huge successful buisness with the morals of a skunk.

I sincerly believe a NO Vote is the only way we will get the answers we all desire. Bills first love is in the field of stage and television. I Have no problem with that. He is also a successful buisnessman, I have no problem with that. What we need is a successful buisness that will deliver what the fans want.a decent home and team in the City Of Liverpool.

VOTE NO. Our future lies on this decision.
Neil Pearse
3   Posted 04/08/2007 at 13:15:43

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Thanks Robert for your reply. Which mostly I disagree with naturally!

One point for clarification. You say: "The deal of exclusivity has blocked outside interest in Everton". How is that? The exclusivity deal has only been in place for some months this year, and only relates to the ground move. How has it stopped any new investor coming in wanting to take ownership of the club over the last several years?

Your idea that investors need to be "attracted" seems to me to take an odd of football as a business, and indeed of business in general. Those (few people) with the money and interest to invest in large sports clubs like Everton know where we are! There has been nothing stopping them coming out of the woodwork and trying to take ownership. I am suggesting that the reason we have not seen them is something other than BK’s "stopping" them (however he would have done that), or his not mounting a roadshow.

And on the KEIOC costings and funding, let’s just say that you are a great deal more optimistic than I am Robert! Like many others I believe that the idea that Goodison can be massively redeveloped whilst not losing substantial chunks of revenue is simply not credible. Even if we had the funding to do it. Which we don’t.

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