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There's debt, and there's debt...

By Alan Kirwin :  27/05/2008 :  Comments (10) :
Interesting piece in today's Independent, which includes a brief analysis of the ownership/debt/value etc of every EPL club.

Many on this forum make the claim that we are mortgaged to the hilt. Whilst not in a perfect state of health, our relative standing is actually very good amongst the 19 other teams.

I still can't get my head around why Liverpool is valued so much higher than Everton. Their debt is astronomical compared to ours. However, the thing that leaves me astounded is just how shit almost every football club is at managing finances.

Every single club is in debt, usually big debt. Almost every club makes an operating loss. And yet the fees for players and their wages just keep going up and up. And the fans just keep digging deeper & deeper into their pockets.

if you showed this to O-Level Economics students, it would be laughed at for it's absurdity. You have to wonder just when this pack of cards will come tumbling down. When we consider how money the clubs get from Sky (i.e. the fans), and from gate receipts (i.e. the fans and from catering, merchandising etc (i.e. the fans), the balance sheets are a disgrace.

So, whilst we are definitely in debt, we are actually one of the better managed clubs in this league. Something which seems to have been generally agreed by many informed commentators, but which is regularly scoffed at by anti-BK contributors to ToffeeWeb.

Reader Comments

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Michael Kenrick
1   Posted 27/05/2008 at 17:00:04

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Great link, Alan; many thanks for spotting that.

How on earth is Fulham worth £150M with debts totalling £149.6M??? The world has gone mad!
Ray Lupton
2   Posted 27/05/2008 at 17:21:32

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I imagine that Fulham is valued at £149M purely on the the back of their location. With Craven cottage being right on the river the land alone is probably worth £70-80M.
Dan Brierley
3   Posted 27/05/2008 at 17:36:58

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Very interesting. But to be honest, I never believed our club has been run particularly badly anyway since Johnson’s era.

Yes, they have made some questionable statements, but that doesnt mean that the club is being run badly in my eyes. Continually breaking transfer records without going into ludicrous debt should be commended in the EPL cut throat environment.

I am looking forward to reading the posts of those that think our club is being run badly. Based on those facts in the independent, it seems not.
Michael Hunt
4   Posted 27/05/2008 at 17:55:02

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Given the position off our finances off the park and upward trend and sound footing of matters on the park, I’m amazed we are not subject to more takeover offers. Especially when one considers the financially inferior Clubs who get snapped up! I mean, Fratton Park is in a much worse state than GP, they have an alledgedly dodgy manager, lots of wage draining aged players with no/little sell on value (Campbell, Distan, Kanu, James etc), much less support etc yet Portsmouth have a Billionaire backer. Why?
Dave Wilson
5   Posted 27/05/2008 at 19:01:17

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So the reason we haven't got a bigger debt is because we are so well managed, Phew! ... and here?s me thinking no fucker would lend us a brass Razoo to buy new players because we can offer nothing as security!

All gobbledy gook to me this finance lark...
Joe Ludden
6   Posted 27/05/2008 at 21:38:29

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Alan, I’m not disagreeing with you, it is a total disgrace - cost of players and salaries - and you are bang on when you ask "when this pack of cards will come tumbling down". It’s inevitable that they will tumble. Best we stop at GP and not saddle oursleves with a huge debt of our own then?? How on earth would we honour such a loan when the cards do tumble? It’s scares the life out of me.
Mike Oates
7   Posted 27/05/2008 at 21:54:56

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Sorry to state for umphteen time this year .. look at Everton?s income line vs most of our rivals: Spurs, AV, Newcastle, Man City... Either the bloody obvious of too low prices or our Commercial arm is rank. Decide for yourself!
ClydeMcPhat
8   Posted 27/05/2008 at 22:08:43

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Why wouldn?t an investor then come in and snap up one of the new boys? If Stoke and Hull are only valued at £10M, then buy ?em and put all your money on the line attracting players of caliber, and sit back and watch your £10M investment grow IF you stay up.... as opposed to spending £150M on the lads at Craven Cottage with the hope of tearing down the stadium to build a new housing development...
Steve Williams
9   Posted 27/05/2008 at 23:33:04

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Good article Alan,

But I’m confused ... I can’t see what the ’Value’ derives from - this must be some sort of judgemental decision and so must be discounted in credibility terms.

Also, I would have thought that EFC’s debt was much higher, but as I haven’t got precise figures, I can’t really argue. But then again, if I haven’t got the figures then no-one else has. I can only think that these numbers are from year ending 31 May 2007, ie a year out of date. Last summer we invested relatively heavily with some monies coming back for Beattie, Naysmith and McFadden. But debt would have increased.

But all of this is mere detail - overall I accept that we compare favourably on the debt front - but its on the income side that I am concerned.

Without income we can’t invest and we can’t leverage loans - perhaps that’s the correlation we should be looking at, not merely value (excluding bottomless pits such as Al Fayed).
Jay Harris
10   Posted 27/05/2008 at 23:32:05

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Alan
good analysis but there are a couple of points to bear in mind.
Players transfer fees are usually written off immediately or over the term of the contract.
For example Torres if he signed a four year contract and cost 24 million would add 6 milllion a year to costs in addition to his salary.
The converse is also true when you sell a player his fee goes to income so for example when we sold Rooney we made a profit that year because it caused a hike in income.
As regards the values shown I saw a recent Deloitte report that valued EFC at 100 million and I dont know the source of the independent’s figures so cant comment further.

Dont know where you get the "we are one of the better managed clubs" from.

There are 8 clubs ahead of us on Turnover and 8 clubs ahead on operating profits/losses (excluding 4 clubs that were not declared but at least 2 have probably got better figures).
Considering we have got 4th,5th and 6th over the last 4 years and 27 million for Rooney I would have expected better but I suppose I’ll get the "Anti-BK" hogwash.

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