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The Transfer System

By Stephen Ferns :  02/09/2008 :  Comments (79) :
I am fed up to the back teeth with people this summer who do not have even the most simple grasp of finances making ridiculous statements about ?where the money has gone? through quoting amounts spent and received on various players and then coming to a ludicrous conclusion. People usually start by writing how Everton have sold McFadden for £4.75m and Johnson for £10.5m, therefore have £15m to spend. Forgetting the obvious and much overlooked fact that we also signed Gosling for £1m, without even having the foggiest idea that Everton have received only a fraction of that money in real terms.

Football clubs like Everton are major companies. Everton have lots of debts and operate within a vast overdraft and are frequently (if rumours are correct) at the edge of the overdraft limit. What people need to remember is that Everton do not save up each season and put money into an account marked ?transfers?. It simply does not happen like this at all. The money that Everton use to buy players is not sat there waiting to be spent. Instead Everton have debts not spare cash. So how do Everton buy players? Well the easiest answer could be to examine the Chelsea model.

Chelsea were bought by Roman Abramovich for a pittance and he then took care of the club debts. Does this mean that he got a chequebook out and spent his own money clearing the debt? The answer is no, it is believed that he has only discharged part of that debt. Chelsea?s original debts have been added to with the vast sums of money that have been spent since. This means that Chelsea pay the debts off themselves and not Abramovich (as is commonly believed). If Abramovich walked away tomorrow them Chelsea would be in trouble.

Now the rest of the league do not have a rich benefactor, so they use banks instead. So Everton go to the banks and get a series of loans. Loans to pay off debts, loans to buy players, loans to pay off loans and buy more players, and further loans on top of that. With Everton so much in debt how do they get loans? Well they have a nice pot of a guaranteed £30m a year for as long as the Sky TV deal has left to run, and the banks have in the past been only too happy to lend clubs like Everton money in order to make money themselves.

As Everton struggle to get credit the banks then require the use of guarantees. What this means is that the likes of Earl and perhaps Green may stand guarantor on a variety of loans as Everton get further loans. So rather than Earl give Everton money, he just agrees to put his neck on the line in the hope that Everton can afford to keep making the repayments by surviving in the Premier League.

So when you hear talk of transfer kitties what you are hearing about is how much a bank may be willing to lend a club like Everton. Now these sums will not cover the whole transfer fee quoted such as the £11.25m quoted to buy Yakubu. The deal to buy Yakubu will be a complex one where the transfer is paid in I believe three instalments, one up front, then one after the first year and the second after the second year. This is for the fixed cash only.

Thereafter, the rest of the quoted transfer fee is made up of ?add-ons? cash per place, cash per number of goals, cash for European Qualification, and anything else the club can be creative with. The fee will be extremely complicated as both clubs will have really haggled to get the maximum / minimum fee possible. So I would expect that Everton paid maybe £3 million upfront and £2 million this summer, plus a number of add-ons linked to European qualification.

I?m sure that the Andy Johnson and James McFadden deals will have worked in reverse and we have received only smallish amounts of cash in one go. Everyone knows that in recent years Everton have only made an operating profit in the year that we sold Rooney (due to the £10 million that we received that year) and that the club operates at a loss in reality surviving only on the TV money.

Therefore, any fee of £3-5 million received for Johnson would be immediately swallowed up by the clubs vast debts and the need to make payments. Once you realise how finance works then you can understand how hard it must be to operate a club like Everton without those major income streams and the constant demand for payments on various loans.

Please can we not hear of anyone saying Everton had this cash all along. They did not. Something happened, I do not know what, for Everton to suddenly get a credit stream from somewhere when they were clearly struggling to do so much earlier in the summer.

One final thing, some people have said things all the lines of we spent £15 million for Fellaini so why couldn?t we find an extra £3 million and sign Moutinho as he being the more romantic and flashy signing was the one we all really wanted. I think that the Fellaini deal is probably spread out over a 5 year period (the fee does not have to be paid within 2 or 3 years as in England) and probably included a vast number of add-ons. On the other hand, Sporting probably wanted an English style deal with guaranteed money paid within a short period of time and where not persuaded to move from this position.

Before anyone says anything. This is based purely on observations, conjecture, suppositions and assumptions. I do work in the City, I do not work or have a degree in finance and I do not profess to be an expert. I welcome experts who can explain this a bit more clearly and correct wherever I may have gone wrong. I wrote this as I want some people to put an end to the constant drivel that they spout in relation to transfer kitties and war chests based on simplistic transfer systems of the 1950s and 60s.

Reader Comments

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Bob Turner
1   Posted 03/09/2008 at 07:44:06

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At last, a common sense approach to our financial position - even though based on "observations, conjecture, suppositions and assumptions", I am willing to bet it’s very close to the truth - particularly the point about Abramovich.

I’m an accountant, and basic double entry bookkeeping dictates that where there is an influx of cash (a debit), there must be a credit - in this case, a loan to Abramovich. Similarly with the Man City situation (and Liverpool, Portsmouth, Aston Villa etc), presumably on an interest free basis, but the loan is there.

The ONLY way this becomes a true benefit to the club is if Abramovich, when he’s bored with his toy, is willing to write off that debt, and he may very well do this (he can certainly afford to!). Ditto for Man City, Liverpool etc.

I think what distinguishes Liverpool’s situation is that their owners do not have the personal wealth to be able to afford to write off their loan, hence the precarious position I believe they are in.

I’ve seen so many comments on here about how we need a rich benefactor to invest in us (as if they’re ten a penny!) - I disagree. What we need is a rich benefactor who would be willing and able to write off the loans he’s subsidised when he wants to move on - otherwise we’ll be left with mountainous debts and a business model completely incapable of servicing it.

Anyway, Stephen, completely agree with your analysis of our financial position - calm, rational and. I believe, unerringly accurate.
Ian Short
2   Posted 03/09/2008 at 07:53:42

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Good article and I agree with much of what is said here. Ther are, no doubt, further complicated factors built into the equation as well. Everyone wishes there could be a magic wand so we could spend £30m on Moutinho and Love. But the club has to be sensible and not spend or borrow way beyond its means (if that is even possible) to meet fans’ expectations otherwise the consequences can be dire (eg Leeds). Without a rich backer (aka Chelsea and now Man City), we cannot compete with the big spenders.

One example is that I saw a fan moaning about Goodison apparently being mortgaged. The same fan, understandably, was probably also screaming for new signings at the time. Unfortunately, we cannot have it both ways and with increased spending on players comes ever increasing debt.
Nigel Gregson
3   Posted 03/09/2008 at 07:46:42

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Great article mate. Finally some sense. Another thing that people don’t realise is that this hyper-inflation of players is a recent phenomenon and is caused by a lot of outside money (read rich benefactors) flowing in. Heck Real Madrid uses government money to buy its galacticos (if I recall correctly).

Trouble is, football as an economy simply cannot sustain these kinds of crazy price levels. When the dam breaks, only time will tell.
Paul Newman
4   Posted 03/09/2008 at 08:00:29

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Thank you Stephen, great that this has been explained, it?s amazing how so many people do not realise what goes on in the background - I am forever telling people "you just don?t know what is happening behind the scenes" as now you can see how hard Kenwright and Moyes work behind the scenes and all the other key people associated with the club. The same with transfer targets throughout the summer, all the rumours trigger serious debates and postings but how many are actually true?? I met a friend in the pub the otehr day and he was nearly having a heart attack because we were apparently signing a certain player he didn?t fancy, now I am passionate about the club too, but to get in that state about a rumour!!! I am positive Moyes made enquiries about a load of players who most Evertonians would love at the club, but how difficult is it to get them, as clubs do not want to sell their best players (unless silly money is offered), if clubs came in for Lescott, Arteta or Cahill, Moyes would tell them "Not for Sale", which I imagine happened when Moyes approached other clubs!!

Thanks again Stephen
Jonathan Tasker
5   Posted 03/09/2008 at 08:26:04

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Good points and to re-iterate also , Everton can only buy players that want to come to us. This is not a factor that inhibits the Big4.
6   Posted 03/09/2008 at 08:22:42

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I agree with a lot of this but Everton and Sporting apparently had no problems with agreeing a fee, the problem with that deal was Moutinho. He wanted ridiculously high wages that we couldn’t offer him, simple as that. Had nothing to do with the clubs at all.
Neil Pearse
7   Posted 03/09/2008 at 08:29:29

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Great stuff Stephen. It gets across how enormously complex most modern transfers are - with very intense negotiations around precise payment schedules, adds on and such like. That is why talk of say £20M for Moutinho and £15M for Fellaini (or £11M for Johnson) really tells so little of the story. It also partly explains why negotiations can take so long and so often now go down to the wire - because both side are trying to wring the last advantage from each other in terms of precise conditions of the deal (even the top line figure may be basically agreed).
simon heron
8   Posted 03/09/2008 at 08:50:20

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Fair enough point we do no understand the complexity of of the business of running a a football club and dealing with transfers but, it does not take away we do not have a man in charge with enought spare cash of his own to invest.
Peter Jonhson did not incest his own cash in the club and if out present chairman has its not millions and millions like we need in modern football. Most teams in the premiership have had big investors why not Everton? The chairman had had control of the club for eight years, sorry but still time for him to go.
mark greenhouse
9   Posted 03/09/2008 at 08:59:14

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Stephen great article, hopefully others will read it and understand the position that many clubs are in.
Johnson was signed for £8.6M over a 5 year contract, he only stayed 2. Therefore his value on the books would have been in the region of £5.1M, which we would have to write off, so net we would have shown £5M total profit on the johnson deal, not the £10M everyone thinks.

Chelski are £736M in debt - fact but this is only in accounting terms. They have £578M in interest free loans from Abromvich, so no debt to repay and as I understand it this debt will be written off should anything happen to him i.e. the debt won’t be collected.
Also Monday evening Everton and Portsmouth were the two clubs named as being in for Joey Barton, turns out it was Blackburn. So how many other of our 90+ targets, this close season did the journos invent to sell papers? writing that convinced fans that Kenwright, Moyes were being tight, useless, incompetent etc
We may have missed some targets but 90? didn’t Man U take until the last hour of deadline day to get the man they wanted since at least Xmas.
Why are we any different?
ged alexander
10   Posted 03/09/2008 at 09:26:26

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Will all regular visitors to this site please read this article and try to understand it. It will raise the level of debate. Thankyou, Stephen.
Joe Rourke
11   Posted 03/09/2008 at 09:31:29

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Good article Stephen. Food for thought.

Cheers for the taking the time!
Terry Beeken
12   Posted 03/09/2008 at 09:37:56

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Excellant article Stephen probably a more true reflection on what has happened this summer.
Also add to that J Mouthino has said today that it was him that deceided not to join Everton so we can not blame Bill for that one... I suspect he has heard of Man City's millions and would now expect him to end up there.
Steve Williams
13   Posted 03/09/2008 at 09:24:16

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Whilst much of this is a very reasonable interpretation of the Club?s position, I?d like to make a few further observations:

1. If Abramovich walked, Chelsea wouldn?t be in trouble because of the debts, as their accounts indicate that those debts are to Abramovich personally and not a third party. He would have no alternative but to write off the loans. However they would be in trouble because the contracts set up for players which will be unexpired could only be funded from new debt - simply because their business model is predicated on making losses.

2. Liverpool?s position is different; the loans have been taken out by the holding company from third parties with security provided by the trading company (the football club) so if the top company falls over, so does the football club!

3. I suspect that I was in a minority of one who wasn?t too concerned that we hadn?t spent money (that we hadn?t got) purely because the incoming transfer and Sky funds must have been put to reducing the club?s debt. This is a highly prudent measure that, whilst leaving us short on the field in the short term, would leave us in a much healthier position medium term ? particularly as we are staring down the barrel of a recession that will probably last 18 months to 2 years.

4. The only thing that I remain unhappy about is the spin from the club ? I?d much rather that we are informed appropriately rather than given soundbites that are pleasing on the ear but are bereft of substance. If we have a well thought-out plan then tell us ? we?re not stupid, we will still turn up every week.

Tony Black
14   Posted 03/09/2008 at 10:27:09

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This is all very well - much of it is correct - but the writer has missed (intentionally or otherwise) one massive piece of the jigsaw here.
Yes, cash received from player sales is often staggered over a period of time, as indeed are the fees we pay for the players we buy, BUT Premier League prize money is paid in full just after the end of the season. Last year our fifth place finish saw us receive £42.1m of prize money - can the author explain to us how Everton "spent" this cash?
Albert Dock
15   Posted 03/09/2008 at 10:36:38

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Mr. Ferns, I have read you post twice to make certain that I had not made a mistake.

The (unstated) implication that I detect is that the entire Premier League could easily become another South Sea Bubble or Dutch Tulip fiasco.

It is almost inevitable that, at some stage, one, or more of our bigger bretheren will turn its toes up and go where they haven?t been for a long, long time.

If the Premier League were the FTSE this would be called a ?market correction?.

Correct or not?
John Murray
16   Posted 03/09/2008 at 10:27:10

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Great article Steve. Thank you for exploding so many myths.
Although you touch on it, the next myth to explode is the notion that if Bill would only move aside there are plenty of people prepared to take on the Club.
Deadly Doug (Ellis) was on the radio this morning saying he turned down lots of offers from consortia(?) that wanted to borrow money to buy Aston Villa. He eventually sold to someone who could afford to buy from their own pocket; wise man. But such people are hard to find; witness the situation across the park!
Paul Johnson
17   Posted 03/09/2008 at 10:37:15

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Wise words!

It seems to me that EFC have tapped all of the financial sources already available: operating profits (when/if there are any), loans against season ticket sales, mortgages against assets (are there any left to mortgage?).

As a business that generates little/no profit, let alone ’free cash’, EFC is beholden to those willing to guarantee further borrowing.

Without such guranatees in this economic climate there would likely be no new incoming players at any price, let alone the £10m+ needed for a player likely to improve the squad.

Incoming funds from player sales are needed to service debt, that’s for sure, and can’t simply be regarded as earmarked for incoming transfers.

Nick Wall
18   Posted 03/09/2008 at 11:00:20

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If only the club had a competent PR department who could highlight some of these issues and help fans get a more sympathetic understanding of the club’s position. Maybe there’s a job there for Stephen ...
Joe Trubshaw
19   Posted 03/09/2008 at 10:54:15

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Boring-boring-boring, we're sick of all these excuses, we all know we have bills to pay and fully understand that incoming transfer money is used for this purpose. That does not explain why we didn?t bring players in earlier than the end of the transfer window, considering we had been paid over £40million at the end of the season from the SKY funds and hence had money available to pursue players.
Rob Jones
20   Posted 03/09/2008 at 11:08:11

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So ....are we skint then?
Peter Howard
21   Posted 03/09/2008 at 11:17:38

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ALL football clubs are skint
Lee Penswick
22   Posted 03/09/2008 at 11:41:27

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Stephen, good article. Just one point, im pretty sure i read that Everton paid an initial installment of £15m for fellaini which will eventually rise to £16m. I may be wrong, but, that is how the deal looked to me. So if that was the case then surely we handed over £15m straight away.
James Asquith
23   Posted 03/09/2008 at 11:46:58

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@Joe Trubshaw

Don?t you think the (approx) £40m TV/Merit payments may have been swallowed up in player wages, delayed payments on previous incoming transfers and (not least) repayments on the dozen or so pre-existing loans/mortgages/overdrafts?

In recent years, we have consistently "factored" part of the Sky money in January to cover operating costs. This means we get a financial institution to give us (e.g.) £9.5m and sign over to them (say) £10m of the Sky money.

I?m no financial expert, and it may well be that this is the most cost-effective way of financing those costs in the short term, but in the long term it is very bad news because it means year on year we are overspending and needing to borrow halfway through the year to continue operating.

A good analogy on a personal level: Your wages don?t cover your living expenses, mortgage, car loan, credit card bills, etc. You arrange an overdraft with the bank (which BTW adds to your monthly outgoings with fees/interest) and in month 1, you dig into that overdraft 2 days before you get paid. In month 2 you go into the red 3 days before you get paid, in month 3 it?s 5 days, etc.

Just how long do you think that scenario can last?
James Asquith
24   Posted 03/09/2008 at 12:02:17

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Lee, I may be wrong, but I read it as we agreed a basic, guaranteed fee of £15m which could rise based on performance, appearances, sell-on, etc. It would be highly unusual to stump up 100% of the guaranteed amount up front for any transfer these days.

Having said that, at 11:45pm on transfer deadline day, and with Everton?s desperation for reinforcements well known, I?d be surprised if Standard hadn?t driven a hard bargain.

Whether that is reflected in the £15m price itself (apparently he was rated at £11m a few months ago), or in a higher than usual up front payment, who knows?
Richard Harris
25   Posted 03/09/2008 at 12:06:08

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Simon Heron wrote " Peter Johnson did not incest his own cash in the club".

Now that?s why I never liked him !! I shudder to think where the incest was going on :0)
Dave Randles
26   Posted 03/09/2008 at 12:06:37

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Very eloquently put, but I’m afraid that’s a patently flawed argument.

No mention in there whatsoever of all the missed marketing opportunities, Sky money or the asset stripping Kenwright has overseen.

I think us fans could handle us having no cash if the Board were slightly more transparent and gave the impression that they were operating competently at the business end of proceedings.

This they do not, they lurch from one crisis to the next and usually attempt to bullshit their way out, often in the form of shallow and empty soundbites from the man who claimed that ’communication with the fans would be his number one prority when he ’rescued’ us from Agent Johnson.

Communicate? Kenwright? You really are having a laugh.
Kevin Gillen
27   Posted 03/09/2008 at 12:19:30

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Jonothan Tasker and Chris make excellent points. The way the Champions League is structured makes it very difficult for Everton to attract players. Ask yourself if you were Moutinho and you had little chance of parading your skills in the highest competition would you? You would certainly want a lot of compensation.

I wonder what will happen now Manchester City have found this astonishing investment. The position of Liverpool FC is now going to come under greater threat as they seem to be the worst performing of the Sky 4. I am sure a way will be found to admit a fifth English club if it were them. If you stand still in football other teams will pass you. I?m chuffed Villa managed to fight off their approach to Barry although at £17 million I did think they were paying way over the odds.

In the meantime we need to build our business capacity and investment base so we can access the Champions league. I do believe it is scandalous the cartel that operates in this way. That a team like SK Brann can contest the CL when they might not survive our Championship is criminal. They are merely cannon fodder for the early rounds to the likes of Chelsea and Man Unt.

steve wolfe
28   Posted 03/09/2008 at 12:32:46

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what about the 20+ million year from gate recipets? also what about the incoming finances from catering,shirt sales / megas stores ?add to that the sky money, cup run money etc.. and yet the debt increases. if we were cost cutting and pulling the purse strings and the debt was being reduced i think most blues would accept that,its the fact that the debt rises and rises.
Steve Ferns
29   Posted 03/09/2008 at 13:00:00

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Thanks for all the positive comments.

None of this was ever meant to be in defence of Bill Kenwright it was just hoped to make people realise that a lot of posters on here forget how the system works and how finance works.

I think Steve Wolfe above sums up what I think, whilst you can understand how Everton are really struggling at the moment with finances and how all money is being swallowed up in massive interest payments and debt servicing, it must be remebered that Kenwright has been in charge for over ten years and only he can be blamed for the club?s current financial situation.

Also, I do not think that Everton can really come out and say we?re really struggling financially, I mean come on think about it. That would be Arteta and co gone overnight as they would ask to go to a club who present as not being in such a poor position and then we would struggle to replace them. The silence from the club is something I can live with. What I cannot live with is the continuous line of broken promises. Bill really should learn to keep his mouth shut as everytime he says something he?s always wrong, even if its other people who may have misled him.

Anyway the whole point of this was not to absolve Kenwright of blame. I wanted to leave him out of this. I just want people to stop saying we got this much for w and this much for x and then there?s the money left over from y so with the sky money we have £z million pounds to spend as football finances are not that simple.
Marc Williamson
30   Posted 03/09/2008 at 12:58:14

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We paid 15 million euros not pounds from what i gatered. The press seem to have trouble telling the difference, they just see a number and assume its pounds. Which makes it around £12.6m or something along those lines i think. Which is also close to the figure we offered for J M but the press got that muddled up too.
James Hazlehurst
31   Posted 03/09/2008 at 09:01:47

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Why is Moyes thanking the board? I know this Fellaini cost around £16mill, but we got £10mill back from AJ and £5mill back from McFadden in January. The Board haven't spent much as far as I can tell..., in fact they haven't spent anything! Where is our money going when we pay out for our season tickets???
Ed Fitzgerald
32   Posted 03/09/2008 at 13:44:13

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A good post lucid, informative and well constucted. Just one comment why would you want to leave BK out of it? Surely as Chairman he takes responsibility for the asset stripping that he must have sanctioned KW to undertake?
Mick Quirke
33   Posted 03/09/2008 at 14:35:05

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Very clever article, and of course most of us know very little about company finance. However the fact is that most Clubs in the Prem, not just our immediate rivals like Spurs, Cuty, Villa and Pompey are bringing in more players than us, and on permanent deals. Most of those Clubs have a lower average gate than us, most have received less Premiership place money in the last 2 years, most haven’t been in Europe.

Most appear to have more outside investment, and I’m sure nearly all run their own merchandisng, rather than farming it out. They all have the same day to day liquidity issues as us, but they do manage to spend MORE, end of, irrespective of debts, installments etc..

So it’s a clever article and brings an insight into how transfers work, but it doesn’t answer the fundamental question of why we can’t compete with most of the Prem. So good try at defending the board lad, but it won’t wash I’m afraid.
Pete Wilkinson
34   Posted 03/09/2008 at 14:59:58

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Good article and I agree that someone needed to shut up those fans who believe that just because we sell players for the amounts the papers are quoting, doesnt mean that our "war chest" will include the same amount.

I beleive in Moyes and I’m sure he did his hardest to attract the right player without paying over-inflated prices. He has never let us down in the past with our signings (with the exception of Beattie) and I don’t doubt him now.

Wouldn’t you rather finish 4th or 5th knowing we’ve earned that place rather than just buy our way into the top four, which is what Man City seem to be aiming for?
Mark Scarratt
35   Posted 03/09/2008 at 15:24:30

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I am reading the financial times or a supporters website
Bottom line we have sold loads of players for loads of money. we finished 5th in the league and went quite far in europe and got a load more money for that.
until we signed Fellaini all we had done is get 4 players for nothing.
I know we have to pay wages etc etc and we have bought Yak, Baines, lescott etc but we should still have more money available than there appears to be

next time try talking about football instead of all that financial rubbish.

You are just making excuses for a poorly run club.

yes I agree Bill kenwright is a true blue and loves the club, but he doesn’t seem to be doing avery good job.

Keith Glazzard
36   Posted 03/09/2008 at 15:42:42

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Yeah - who needs all this financial stuff. Its just common sense innit. Mind you, my mother always used to say ’common sense isn’t so common’, and I think she was right.

The Middle Eastlands situation throws a huge boulder into the pond. Platini and co want to change the way clubs are financed, and a self-proclaimed attempt to buy the European championship might just get them moving.
Steve Ferns
37   Posted 03/09/2008 at 16:22:40

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This article addresses the transfer system. That is its focus, it is not meant to put forward excuses for the board or to defend them in any way and I am suprised that anyone has interpreted it in that way.

If you want to question Kenwright on the basis of this article then surely the main thrust should be that after over 10 years of Kenwright?s stewardship then only he can be to blame for the current financial state and the fact that all of our income appears to be swallowed up in servicing their debt. And furthermore how can Kenwright justify taking Everton into a further level of debt as he surely must have in order to finance the Fellaini deal.

I find it hard to believe that anyone can increase the club?s debt at the moment with the club?s best interests at heart as the current financial climate which is set to getmuch worse and appears capable of taking a big club or two down. You only have to look at how the likes of Newcastle and West Ham are panicking. Villa are run by the owner of MBNA / Bank of America, Tottenham sold a lot of deadwood for good money and the amount they are reported as "spending" is much less than that they "recieved".

If we do get Love in January then I would be very suprised and would not expect another transfer record next summer.

Everton are in a mess financially, and whilst credit at this extreme level appears to be something of a british disease going from Government and big business all the way down to the man on the street, it is Kenwright?s mess and he should take responsibility fot it.

One last point, there is no way on earth Everton will get a new stadium now. The price of steel is out of control and the stadium MAY cost 2 or 3 times as much as the figures Wyness quoted to build and those prices will continue to rise until we pay for the building costs and hold them to an agreement (similar to what the council very cleverly did with Grovesner and the building of Liverpool One). I cannot see Tesco wanting to absorb all the extra costs and the deal must be getting less attractive to their shareholders by the day.
38   Posted 03/09/2008 at 16:51:07

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I am absolutely amazed at the reading comprehension skills of some of the posters. Did you read the initial column before you posted your response? There are many, many posts here that argue the same points that our guy is refuting in the column. Please read the entire article before responding....and BTW, once you pay a trasfer fee, you actually have to pay the player on a weekly basis too. Did you ever think the wage bill might be responsible for the moneyproblems we have?
David Kiely
39   Posted 03/09/2008 at 17:16:54

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Ahh, so that?s how it works?

To be honest, and whilst we should all strive for knowledge, the nuts and bolts of financing football clubs - organisations that play a part in our social life, giving us a sense of belonging and allowing us an escape from reality - should be averted at all costs (no pun intended).

As some of the replies above demonstrate, an unintended consequence of such obsession is to ?understand? the predicament of the owners of the club who, adding to the mistakes of previous owners in their governance, brought us to the position where we?re pressing F5 at the stroke of midnight to see if we have a season ahead of us.

Sometimes ignorance should be encouraged. Let those who?ve mismanaged stew in their own piss rather than offer to mediate their operational struggles to the masses.
John Dean
40   Posted 03/09/2008 at 17:11:14

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As you put it "This is based purely on observations, conjecture, suppositions and assumptions. I do work in the City, I do not work or have a degree in finance and I do not profess to be an expert" I am also guessing that you are not Bill Kenwright, Keith Wyness or Robert Elstone and have never seen Evertons accounts? I’d just like an explanation of how you can argue that we have no money without seeing evertons accounts or being in any way qualified to speculate at them? Given i have as much financial background as you I’d like you all to do a little mathmatical test: Lets start with things we can have an educated guess at:
Evertons average attendence of 36,955 multiplied by home games last year of 25 multiplied by average price of tickets say £25= 23 million. Prize money last year of £10 million. That equals 33 million which pays for 18 players earning an average of 35000 a week.
We havent even taken into account kit sales and merchandise, food and drink at the ground, hit the bar ticket sales, sponsorship, everton tv and most importantly TV MONEY. Now this is an extremely rough calculation but for the life of me i cannot see how everton fail to make a significant profit even once you take off the academy, staff at the grounds costs etc. There is either money to spend on players without taking loans off banks OR our debt has been significantly reduced.
Roy Caine
41   Posted 03/09/2008 at 17:46:22

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John I understand where you’re coming from, but I would guess that the loans of which Steve Ferns talked about are not interest free, but they are necessary to provide the cashflow to run the club, such as to break the transfer record 4 seasons running (I understand that we have spent very little net but the money still has to be found).As an example, (and someone may be able to prove me wrong on this one) I was under the impression that the securitisation loan against season-tickets over 25 years raised 30m and will cost a total of 68m by the final payment.In turn the club factorise season-ticket sales to get hold of the money early.Servicing our debt is expensive.Like a lot of people on here though, I don’t want to defend Kenwright - its really frustrating when he promises "watch this space" - but articles like this certainly make it easier to take some of the things that do happen
Lyndon Lloyd
Editorial Team
42   Posted 03/09/2008 at 17:54:45

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Mark Scarratt and Joe Trubshaw, please grow up and realise that this is where adult conversation about important matters concerning Everton Football Club — the club wouldn’t exist without taking these issues you find so "boring" into account — takes place. If you want to go "play in the sandpit", there are other sites where you can go.
Phil Robson
43   Posted 03/09/2008 at 18:46:20

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Rob Jones - brilliant. Only just about stopped myself from laughing to write this.

Stephen - just another massive thank you for your posting which has triggered such intelligent and well thought out points.

I would like to echo the comments of many others in that transfers are only one stream of income. Are we asuming that the Sky money, gate receipts, commercial activities etc net off the day to day running costs of the business?

The points raised by Stephen are exactly the reason why KEIOC and the Liverppol Council need to be educated with regards to the ground move.

Keep the faith.
Mark Scarratt
44   Posted 03/09/2008 at 19:23:55

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I am grown up
I pay good money, i.e my season ticket, to support my team.
I always will do.
I think it is a legitimate question to ask.
I love the club, but to me it does appear badly managed.
I only asked where the money has gone.
I apologise for not being as financially astute as Mr Ferns.

Juts because somebody has a different point of view doesn’t make them any less of an adult

Stop being so patronising and just accept that this an open forum where people express their views . You may not agree with me, but without free speech and the right to express an opinion, we would all be like robots.

We must trust Mr Kenwright and the board to get on with their job and do the best they can for Everton. If they don’t surely we are entitled to say so.

With all respect to Mr Ferns, he clearly has a good grasp of financial matters, but how many of us can really say that we know what goes on behind the scenes.

We had a great season last year, and this is the best time to capitalise on that and push on to try and achieve more on the pitch

Aidan Wade
45   Posted 03/09/2008 at 19:15:03

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Great article, reassuring to know that the semi literate yobs are merely loud, not a majority. I was beginning to dispair.

Amazing how the dissenters have apparently failed to read the article, and what it has to say about the true nature of the sky millions, and transfer windfalls.

Some people also seem to forget the millions of pounds our first team EACH earn, every year, I doubt the sky money pays much more than player wages, never mind the millions required for the myriad of other costs accrued in simply opening the doors every day.

I get the impression from some people hereabouts, that their finacial acumen barely stretches to counting the change in their pocket.
Lyndon Lloyd
Editorial Team
46   Posted 03/09/2008 at 19:45:51

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Mark, my issue isn?t with your opposing views on the club?s finances, it?s with your opening line: Sorry
I am (sic) reading the financial times or a supporters website

It was an immature response to what has been an intelligent discussion.

I'm fully aware that it's an open forum where people can post differing opinions — we built and operate it that way!

Carl Knight
47   Posted 03/09/2008 at 20:36:59

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I am not qualified to make a strong argument against Steve’s comments but I worry that our operating cost are no steeper than those for clubs like Spurs, yet they seem to be in a much stronger position than us, both in terms of recruitment budget and wage structure.

We have just signed our biggest shirt sponsorship. Our gate receipts must be considerable, increased funds from back to back top 6 finishes and the income generated from outgoing player sales surely gives us a little more financial freedom.

I really don?t want to find Everton in the position Leeds found themselves, but fortune favours the brave and this season represents our chance to break the monopoly of the ?big four? this will only be achieved if the board finance David Moyes to match his ambition. Two free transfers, a loan move, a third choice keeper plus the big fella (god I hope he?s as good as he looked against those in red). The point I am trying to make is no matter where it comes from we need to start spending more of it. COYB
James Brand
48   Posted 03/09/2008 at 21:27:16

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Great article mate...

My point would be this....

Wouldn’t we all have so much more respect for Bill Kenwright if he had have written it!?! I would!

Rather than feeding us bits of untruth and keeping us on our toes all summer with lies I would have to salute such honesty and respect the man.

Admittedly, it’s not nice to hear from your chairman that we’re THAT potless, but I’d respect the fact he’d come clean.

Sadly that hasn’t happened. I can deal with anything but dishonesty. I tell me kids that. I don’t care what they’ve done, we can deal with it, but it’s the dishonesty that severs all respect.

Shame on you Bill.
Paddy Edmunds
49   Posted 03/09/2008 at 21:20:54

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Simple question then, as I’m not very clued up re business economics or good at maths. As Everton is a private company - are the accounts then not a public document? Wouldn’t they have to at least be available to all shareholders? Or is it you can’t tell from them the total debt? Secondly, I recall some financial ’guru’ (not the Prof TW hates) doing an analysis of Everton’s financial status quo in 2003/4. The gist was in 1966, EFC had the best ground in England and had just signed the ’Zinedine Zidane’ of the 66 world cup - Alan Ball. The difference between then and now was the Moores family - and we need to find another one if we are to compete?
Tom Muktar Caff
50   Posted 03/09/2008 at 22:11:02

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Kev Lucas
51   Posted 03/09/2008 at 22:21:28

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Firstly, great original post ? extremely thought provoking. Many of the replies hold valid points also. Just thought I?d add my opinion.
From what I can see it is possible to get some idea on how well Everton is being run and I have been looking around the internet to get some figures to try to work out what?s going on.
Looking at transfers alone, David Moyes has spent approx £94 million and recouped £69 million. Considering where we are as a club, on the pitch, this shows how good a job DM has done with limited resources. That is certainly one way of looking at it.
People have been asking where the £40 million from sky goes, or the £33 million from ticket sales goes to? The facts are that broadcasting rights give us about £25 million a year, gate receipts are actually only about £17 million. Considering the operating costs (not including buying players) is well over £50 million (including a wage bill over £38 million) you can see how far the major income goes.
That is where we are. I?d hazard a guess that after the end of the next financial year we will be in the same position as we were 5 years ago (net debt of just about £30 - £35 million). It would be far worse if we hadn?t sold Rooney. Since he was home grown it was effectively having a free boost of £30 million pound into our accounts spread over 4 years.
They are the facts. My opinion is that BK loves the club but can?t do much more than he is doing. Unless we find extra income from somewhere, or find another Rooney, we won?t even be able to continue spending as we have done. Never mind really start pushing the boat out to try and improve drastically.
On the up side, we have one of the best managers in the game. We?ve got the best team we?ve had for years with promising talent coming through. And above all we?re Everton Football Club. That means more than any amount of money.
Paddy Edmunds
52   Posted 03/09/2008 at 22:17:37

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Cheers Tom, Now can anyone give the uninitiated a brief outline of what it means? Apart from the obvious, we owe a lot of money!!!
Kev Lucas
53   Posted 03/09/2008 at 22:28:05

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I think I just did that Paddy mate.
Victor Johnson
54   Posted 03/09/2008 at 21:41:24

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Dave Randles
On the subject of asset stripping I presume you are largely referring to the sale and leaseback of Finch Farm. Please bear in mind that the value of an asset is only realisable on its sale, so unless we were thinking about relocating the academy again in the near future, perhaps it made sound sense in order to raise what must have been much needed capital. The true value of Finch Farm is not in its market value as a property but rather its efficiency in doing what it is designed to do - ie. develop talent. If it produces 2 first team players a year (plus 2 more to sell on to MU) who in fact should give a toss about whether we owned the place or not. As EFC is not (yet) a property developer it is folly to shout from the rooftops that we ’own’ something, but have no intention of selling it. That is what we call sentiment and that won’t fetch much on the open market.
Of course, selling assets to raise working capital suggests only one thing - insufficient revenue to sustain the business. And that is scary.
Lyndon, why not set up a discussion topic based around how the club could possibly (i.e realistically) raise revenue (putting the stadium issue to one side)...? I am sure it would generate a lot of interesting and workable ideas to present to the club.
Victor Johnson
55   Posted 03/09/2008 at 22:35:23

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First idea...
Why not start by franchising the so-called Everton coaching methodology if it is so good? Forget about wasting money on expensive academies in Thailand and China with little gain. Franchise the methodology, charge a significant (but not prohibitive) royalty fee and take the product to grass roots football around Europe. It’s gonna happen sooner or later (monopolised by the usual suspects no doubt) so why not steal a march now. If the club so happened to be looking for a master franchisor in Central Europe I would be interested - accepting that the methodology works in the first place. Just an idea...
Ken Finch
56   Posted 03/09/2008 at 22:56:58

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Here I am on my 31st wedding anniversary reading ToffeeWeb instead of ..... well 31 years is a long time and I have just come in from having a meal with my beloved. I have turned on the internet and she is watching Desperate Housewives - which one is in need of therapy?

Anyway, on to the serious stuff; I have just read one of the most thoughtful pieces posted on this site for a good while. None of us really knows the ins and outs of football clubs and how things work bit Stephen?s remarks have more probability of being correct than other more emotional contributions that smack of the heart ruling the head.

To a large extent I know he is correct because for a large part of my career I have been a Director of Finance in local government and whilst I did not dabble with transfers I have certainly dealt with borrowing money to finance investment and rescheduling loans to take advantage of changes in interest rates and to gain benefits to my Council?s finances where I could. Nowhere near as big as football money perhaps but a lot of it went to assist expenditure on services we all depend on locally.

I just wish the same kind of analytical thought could be applied to what we do about a new stadium where much emotional hot air has been ventilated by those who do not realise the economic facts (big schemes need a benefactor or other commercial interests to offset a community benefit) or refuse to countenance real business logic (a shared ground plus government grant plus commercial attraction). I have little doubt much emotion was spent at the EGM tonight - I had to miss that as well for the anniversary - with little acknowledgement of money makes the world go around.

Stephen?s article is born of logic and we should all heed the message.

Paddy Edmunds
57   Posted 03/09/2008 at 23:19:42

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Thanks Kev etc. So, in a nutshell, it’s Kirkby or bust?
Nick Armitage
58   Posted 03/09/2008 at 23:16:52

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"Football clubs like Everton are major companies." Football clubs like Everton in the middle tier of top flight football are not major companies and with their respective turnovers are probably only representative of a medium sized regional enterprise.

Let?s get Everton into perspective, maybe Premier League clubs like us have a high media profile but in terms of turnover we simply do not measure up to any major company. The Everton Football Club Company Limited is a small company that is lucky to have a TV income to squander on a yearly basis. Comparing the club and its revenue streams to that of a major company is well wide of the mark.
Lorcan Walsh
59   Posted 03/09/2008 at 23:29:52

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I welcome the introduction of a little ?sanity? to the discussion as to ?where the money goes? and ?how much is available?.

As I read it - and thanks by the way to Tom Caff for the EFC accounts - we are definitely punching above our weight if we equate performance to spend and potential income streams.

Not having visited the Grand Old Lady since 1980 (sorry - some of you will say I?m not a real supporter even though I live abroad) I don?t know how delapidated she is BUT I would question whether a spanking new stadium will attract more punters and greater revenue from the supposedly desperate corporate market.

The fact is - as some others have alluded to - the golden goose of SKY/Setanta megabucks may soon be cooked - and corporate entertainment is the first thing to be cut in times of recesssion.

Personally, I don?t think we should be chasing every last revenue stream and paying ever higher wages to unproven talent - that race is already run and I expect that it?s going to get pretty ugly in the coming 2-3 years.....
not least for our beloved neighbours...

I?m for consolidation - let?s focus on getting the team performing AND be proud of who we are and what we represent.

Bill - if you?re watching - why are you looking for a billionaire ? Can we think of any suitable ones?

Jon Martin
60   Posted 04/09/2008 at 02:56:09

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This is why I love Toffeeweb, and also why a lot of people laugh at it. There are well thought out articles, with other intelligently framed replies, which in turn get further educated responses. It is fascinating just how much Evertonians know, both about the club, and the world at large,

Then there are people like Scarrat and Heron. I really hope, for once, that it isn’t an ’Only Everton’ thing.

And to Simon in particular, if you can read and understand, BK has said, since day one, that he will sell to any financially capable and responsible party. ’Time to go’? you utter bell, do you see people lining up to buy EFC? Please point them out.

BK borrowed massively to buy, because Agent Johnson was poison. If he could find an ADUG, don’t you think he’d sell in a heartbeat?
Andy White
61   Posted 04/09/2008 at 05:38:39

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Great article. After reading the posts after many other articles I was starting to think we had some of the least intelligent fans in the premier league but after reading the comments on here it’s a relief to see that at least 95% of the people replying have a brain.

Billionaire investors have ruined the sport and turned it into a rich man’s plaything. The top clubs nowadays are not based around their fans but around how much backing they have. We can either be "the people club" and accept that coming "best of the rest" is a success or hope to be bought out by a billionaire and have a crack at the CL but have to accept that we are NOT the people’s club any more.

BK admitted today that he doesn’t have the finances to be the latter (nothing we didn’t already know).

Who knows where we’ll end up but I’ll tell you what I’m a much happier bluenose under the BK / DM combo than I’ve been at any time in the previous 20 years...
John Pulman
62   Posted 04/09/2008 at 06:11:52

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Just reading through and i got to say thanks to steve - I would be the first to admit i didnt have a clue about how the club ran its finances and I would have been in the group adding up the AJ and Mcfadden deals and wondering where the hell the money has gone. This article, while it has not made me any happier with the situation, has at least put to death my fear that money was being spirited away as somebody’s ’nest egg’. Once again thanks steve.

Also on a different note - i noticed Ken Finch mention it being his 31st wedding anniversary - may i offer my congratulations mate. 31 years is a hell of a long time. (although i do believe you would have got less for murder lol)

Above all - Better dead than Red and COYB!!!!!!!!
Mark Scarratt
63   Posted 04/09/2008 at 08:59:10

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On reflection I can see how my original post would be construed as "immature", so for that I apologise.
It was not intended that way and the article by Ferns is very good.

My only concern is that despite all the excellent thoughts and ideas posted here, nothing will change, because the people running the club don?t appear to have the same common sense as the fans on this forum.

I am also concerned about the possible stadium move, and I think money is being held back for that.

At present we average about 37,000 or 38,000. We only got 34,000 against Portsmouth, although that was down to their poor away following.

I just can?t see how we are suddenly going to fill a 50,000 capacity stadium.

The location is not the problem. I would go anywhere to watch Everton. The problem I have is that I don?t want to see us play in a 50,000 stadium with gate of only 34,000.
We would end up like Middlesbrough with a big stadium and loads of empty seats.

Arsenal were different because they had a huge waiting list for season tickets so when they built the Emirates they knew they would fill it.

Correct me if I?m wrong but we don?t have any waiting list for season tickets and we don?t lock people out who walk up to the game on match day. We are even trying to sell under 16 season tickets for £190.

Better surely to spend the money on players that can improve last seasons 5th place. Push us into the Champions League on a regular basis and our income will shoot up, thus attracting even better players. That in turn should generate more supporters, and I then think that will be the time to move to a new stadium.

Anyway this post is a bit away from the subject of the finances, but I think the stadium issue is why our finances are not as they should be.

Once again apologies for the original post, but I was only trying to be light hearted.
As fans our only concerns should be the team, the players and the matches we watch.
I suppose if all was rosy in the boardroom then we wouldn?t need this type of debate.
I am just worried that we are all in danger of getting bogged down with all the financial goings on and that will detract from discussing other issues.

Anyway an excellent website.
Phil Chappell
64   Posted 04/09/2008 at 09:03:36

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STEVE Ferns & BOB Turner...THANK-YOU for bringing reality back to the posts on here Mark S included. I might be a bit dumb at times,but it does bring a bit of clarity & sense to the clubs predicament.I am glad BOB TURNER an actual accountant has looked at the figures instead of amateurs.Transfer market like gambling on the stock exchanges,horses,etc.You never quite know what you get.Wenger & then Moyes who £ for £ have spent reasonably wisely from my angle.Keep up the good posts!!..PC
Steven Hill
65   Posted 04/09/2008 at 09:55:48

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The accounts are from May 31st 2007, before the extra sky money arrived. So the £27m quoted as TV money should increase by £15m in this year’s accounts.

The striking features from the accounts are that:
In 2007 we made £7m less in revenue from merchandise and sponsorhsip than 2006. The club vaguely attributes this to not being in Europe.

The club pays £3m a year in interest on bank loans.

Bill Kenwright only owns 25.04% of Everton FC. Earl owns 23.2%

The debtors (or the money that the club is owed from other parties) was only £6m, ie about 10-15% of turnover is coming from clubs paying for our players in installments.

Similarly short term debt, our installment payments is about £2.5m.

Simply: The extra sky money paid for Fellaini and Yakubu in the last two years. Wages are limited by gate receipts and is why players such as SWP and JM rejected us.
Peter Lee
66   Posted 04/09/2008 at 17:35:55

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You know nothing really changes. I understand that John Moores, who had substantial shares in Liverpool and Saints at the time, never put his hand in his own pocket for EFC. Rather he did what is going on now; he guaranteed the loans that bought the likes of Alex Yong and Alan Ball. We owe him no less respect for that though.

I got involved in a conversation before the City home game last season with a City fan, friend of a mate, who had been part of the due diligence team September 2006 when LFC went looking for the refinancing and stadium loan. What he said sounded like a script from a situation comedy and was lapped up by all the blues present of course but he said one thing that really brought the whole thing into perspective.

If a businessman was given £400 million to invest the last thing on earth he’d do would be to buy a football club. None of them make a return on investmant. MUFC made a substantial operating profit season before last but interest payments put them further in the red than when they started.

On the other hand if you can buy the club then borrow against it to pay the loan back, Glazers and the LFC duo, then it makes excellent sense. A no risk (for you) investment with some potential to sell on at a profit. The DIC prospectus talked in terms of a seven year investment don’t forget.

Then there are the latest "mad millionaire arabs" who just happen to like football in general and and MCFC in particular. Oh yeh!

With regard to BK, you either trust him or you don’t. You have to make your mind up.

It certainly is down to him that we are in the position that we are in because he has been in charge for so long. Remember where we were when he started though, and nobody has given details of the state of the finances when he took over. We had a lot of very overpaid players on the books for the first three years of Moyes’ tenure and all of that needed to be managed out of the system. We still don’t get fantastic gates and we like to boast to our southern neighbours and to the mancs just how cheap it is to go to GPk.

He may well have been secretive with financial information but if the truth is that we are never more than a stones throw from queer street then it isn’t the information you want to get out.

If Michelle Platini eventually brings some sense to bear on European football with limits on debt and salary caps we could be one of the few premiership clubs that isn’t in turmoil.

In the meantime nobody can question that we need to raise more match day revenue. Anyone for a new stadium?
David Arrow
67   Posted 04/09/2008 at 22:03:51

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I?ve been a passive reader of TW for some considerable time and for reasons unbeknown to me your article has somehow got me to start tapping at the keyboard. I really don?t understand why because I feel no more passionate about our shambles of a pre-season than I do about our departed CEO or the disaster that is Kirkby. Any how here goes?.

I read your article with interest but still remain firmly rooted in the ?where?s the money gone? camp. So we sell and buy players on the never never, that isn?t essentially a new phenomenon and in any case, providing the income is guaranteed over a specified period the club can raise debt against it and shouldn?t be financial constrained just because the full amount hasn?t been paid up-front.

As I understand the situation, the long term debt is secured against future season ticket sales and the short term debt by the SKY deal. Where I do agree with you but where I don?t think you have made the link is the debt needs to be guaranteed. This is where Green and/or Earl come in. They appear to have been willing guarantors when Kirkby looked likely but it can?t be a coincidence that our financial woes have been the dirty linen that BK has been washing in the media over the past few weeks, subsequent to Kirkby being called in.

If Earl/Green are now unwilling to act as guarantors because of the very real possibility that Kirkby won?t happen then BK needs to find alternative guarantors to keep the lenders on-side. To nail further colours to masts, from this writers eyes Kirkby going belly up is a long term blessing in disguise. If they have got cold feet or see that the gravy train has run out of steam then that presents BK with a real headache. The knee jerk and obvious reaction would be to freeze the transfer kitty and what monies where assigned to it (£30m was the sound bite) pay off some more debt, keep well below the banking covenants and be seen to exercise financial prudence in the eyes of the lenders.

That to me is the real rub of the issue and is conjecture that we?re unlikely to have quantified until at least the end of the inquiry which according to Elstrome will be next summer. Just in time for the next big transfer merry go round and after season tickets have been pre-sold.

If it all revolves around banking guarantees linked to Kirkby, then why not share it and we could all live with the situation a bit easier because without clarification and based on the cards facing up rather than those we can?t see, by my reckoning our financial position should have been stronger in summer 2008 than the previous year. Why?

The board will have constructed a financial budget in June 2007 for season 07/08 and by common consent will have budgeted us to finish 10th. At £750k a place that brought us £3.75m incremental revenue. Also, if we believe what we?re told we won?t have budgeted for the departure of AJ, so instalments or not that is c£10m on the balance sheet ditto McFadden at £5m. Add to that a longer than budgeted run in the Carling Cup (budgeting a 3rd round FA Cup exit was spot on) which generated increased gate and TV revenue. I thoroughly enjoyed our European escapades even the train journey to Kharkiv but accept that the UEFA Cup won?t make us rich, at worst we?ll have broken even. So, significant incremental revenue over budget from our on field activity.

Whilst I accept that the opportunistic sale of McFadden may have been used to pay down debt the same can?t be said for AJ, unless of course it was always part of the master plan to sell him. For what it?s worth, I think we hit the Kirkby rocks, the pre determined transfer kitty was frozen and AJ was sold to provide funds for the Moutinho bid and subsequently the Fellaini acquisition.

Unfortunately, whilst the club has insisted that Kirkby and the transfer kitty are mutually exclusive the circumstantial evidence points to the contrary. Never has a Wyness sound bite resonated so ominously. ?There is no Plan B?. I read the Elstone statement emanating from the EGM and whilst the tone is softer than Wyness the intent remains the same, because everything hinges on it. That is a scary place to be and is down to a board that has not had the commercial acumen or desire to attract credible investment or create a viable alternative strategy. No wonder BK?s tone has changed, his mates are ready to do a runner and there is no Arabian sugar daddy interested in our club in its current parlous state. Abu Dhabi United looked at Arsenal and Newcastle before settling on City. We?re not even on the radar, a shiny new stadium will attract potential investment, exiling ourselves to Kirkby won?t.

Oh, and while I?m in subjective mode, I believe the Kirkby issue is the common denominator behind Moyesy stalling on his contract. Now he may well be putting pen to paper as I write this, chuffed that we have broken our transfer record and all in the garden is rosy again, or he may just wind the clock down and wait and see what happens with Kirkby, whether Earl/Green stick around and see if BK can put any substance behind his platitudes. I think it will be the latter and I can?t blame him.

So there it is, I remain in the ?where?s the money gone? camp and squarely lay the responsibility for our ailing condition on inept management at board level.
Two final points: Firstly, if Abramovich walked Chelsea wouldn?t be in trouble. He has set up a trust (£300m I think) similar to Jack Walker at Blackburn. Secondly, you?re not the Brighton Steve Fearns who paid 63 quid for a bottle of red wine in Bergen airport are you?

Onward Evertonians?

Steve Ferns
68   Posted 04/09/2008 at 22:20:56

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David, I?m Merseyside born and bred and have never been to brighton in my life mate :)

Also I entitled the article "The transfer system" not "Where the money has gone" as I was not attempting to explain where the money has gone but rather to explain how the transfer system works and to give people on here, who appeared clueless all summer long as to how it worked a reality check.

I am suprised that no one has picked up the baton I laid down as I had hoped someone with a greater insight into football finance might elaborate further and on this, even if they clarified a few issues.

Some people seem to have interpreted this as me saying BK?s alright. I have a lot of questions that I would like to ask him and if I had the opportunity to attend and speak at the EGM I definately would have given the board a much rougher ride. Fair play to the boys for their stirling efforts in organising an EGM as that was a feat in itself to get the required votes from the shareholding.
Howard Shaw
69   Posted 05/09/2008 at 09:44:39

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Why Stephen, as it appears from your excellent article & the thread of far more financially astute persons than me. Has the club allowed Phillip Carter back into the fold.
I remember the quote attributed to Carter when Barcelona enquired about signing Lineker. He is reported to have said words to effect that Don’t waste your time, how much do you want for Bernt Schuster? Lineker was gone within a week.
Leopards & Spots?
Peter Bennett
70   Posted 05/09/2008 at 10:32:42

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Thise people suggesting that the Sky money of £40 million+ should have allowed us to make signings are failing to recognise that this money represents a major slice of the clubs turnover which is used to finance operating costs such as players wages and repaying debts as well as paying for non playing staff and stadium up keep. May I suggest that these critics pay as much attention to ALL of the clubs outgoings (not just transfers) as they do to the clubs incomings. Excellent article Stephen, however there will still be cynics who would rather believe that the club had frittered away it’s inheritance.
Steven Hill
71   Posted 05/09/2008 at 11:48:04

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Peter, there IS an extra £15m coming in for the last two seasons, which goes beyond the running costs of the club. This has been used to fund the recent acquisitions a season in advance. Take a closer look at the accounts yourself if you want - the club was balancing its’ books (just about) prior to this extra cash and there has been no extra expenses since.

Any extra money ie from the transfer of Andy Johnson regardless of whether it is in installments or not AND any NET profit from gate receipts from extra games last season (roughly 5 home games) is still there to be spent, and maybe spent in January.

The only extraordinary activity which may limit this is the new ground and the legal costs etc which maybe where the money is going. Unfortunately we wont know until this seasons accounts are published in November 2009.
David Arrow
72   Posted 05/09/2008 at 12:30:39

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I fully appreciate the point of your article and enjoyed reading it.
To clarify the Brighton reference: The Gatwick flight back from Brann was delayed and we were in the bar at Bergen airport trying to making our 8 quid lagers last, we were joined by an exiled scouser and his son who had just been ripped 63 quid for an average bottle of red plonk. I thought his name was Steve Ferns, clearly lack of sleep and expensive lager played tricks with my memory.
Liam Cassidy
73   Posted 05/09/2008 at 16:26:43

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Well I started to read some of the comments but got a little glossed over after reading comment after comment and I may be reiterating what is already being said. I can understand what was said over the transfers, which says basically that we’re constantly borrowing against existing debt. One question that needs raising is where is the extra tv money going? If its being used to cover expenses then surely we should all be worried because if it wasn’t for the massively increased tv revenue we surely would of gone bust right now.
You mention that we dont understand how the transfer dealings work but the money we get pays off exsisting debt, like an overdraft (being a newly graduated student I know all about them believe me). But the promise of 10 million plus 5 million means that we have 10 million plus 5 million to promise away. Kenwright himeslf said moyes would get the proceeds of the Jonson and mcfadden sale. Well thats 15million straight up, prior to the johnson sale moyes said he had a budget and one he seemed willing to work with. Thus it goes to stand that we must have a few million extra available to spend, borrowed or not. No football club works with funds in the black and are always in the red so to speak with funds raised against future earnings, just as an awful lot of businesses are run. Question is why is the extra money from the league for finishing higher up and for the extra tv money not being used, are our finances that bad? Surely bolton, fulham, wigan, pompy who have a smaller fan base can afford to balance their books and finish much further down in the league, with worse runs in cup competitions.
My only question is this, without the extra TV money would our illustrious club already have folded?
Nick Carter
74   Posted 05/09/2008 at 23:16:57

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How I saw the Moutinho deal was simply that we couldn’t pay enough up front. He wanted to come - it seems our current favourite agent and tapper upper Pini Zahavi made sure of that - and his statement this week was merely placating Sporting’s fans.

As for Abramovich, a substantial amount of that debt would still be repaid if he were to leave. However, there is an agreement that Chelsea have 18 months in which to come up with a repayment plan that satisfies him. This gives them enough time to reduce their wage bill and sell players without being forced into accepting low bids.
David Ellis
75   Posted 06/09/2008 at 10:09:51

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Q.Where does all the Sky money go??

Ans: according to Deloittes Everton paid over 65% of their revenue on wages last financial year. The highest ratio of any PL club.

People who think this discussion is boring are obviously a bit short of intelligence!!

Brett Bradshaw
76   Posted 08/09/2008 at 20:02:18

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Great info Tom Muktar Caff.

So we can’t really afford the salaries then. Can’t wait to see how the others cope when (if) Citeh bag the coverted CL place, Arsenal, RS whoever they are, they will find it a hell of a lot tougher then we do!

We are a team built to survive outside the ’Top 4’ anything else is and was a bonus.
Phil McNamara
77   Posted 08/09/2008 at 20:35:02

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Nice article, well written.

A few points on the comments -

First Mark Scarret: we DONT NEED a new stadium???? Are you having a laugh??? We are losing millions upon millions in lack of sponsorship opportunities and fans coming to the ground early to use our facilities etc... We need to move...end of.

I love it how everyone hate Kenwright all of a sudden. I mean what has he actually done? Not communicate...oh no - burn him at the stake. Didn?t he sack Walter Smith and hire David Moyes?????

Kenwright knows he is a little out of his depth but the man is doing a better job than predecessors and I would rather have EFC?s financial situation than LFC?s! They are screwed if things go pair shaped.

Granted - Kirkby was a fiasco, and we need a new owner but who here could honestly do better - any billionnaires you know willing to buy EFC? No? Didn?t think so - back the club and stop jumping on the bandwagon - the real people we need to be having a go at are Earl and Green and the other greedy good for nothing directors. What they actually do???? Invest any money? No - they should either show us the money or get lost.
Rich Pemberton
78   Posted 09/09/2008 at 13:02:27

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I work in finance and specifically the debt markets but I don?t get much of an insight of corporate financing which is a whole different area. All I can say is that all of the original article sounds highly probable and realistic.

You can?t compare the likes of Spurs with us as they have a revenues that are around double ours. We moan about not enough money, about board deception, needing a billionaire, etc etc. I look around and struggle to see many examples of clubs doing things ?properly? with a realistic business model that makes sense. That?s mainly because football is a business that makes no business sense. It IS the worst ?investment? in the the world as all everyone really wants is to have more money than everyone else so they can spend more than anyone else. Fuck making a profit when you can buy another player eh?

One thing?s for sure, no-one would give a flying fuck what Blue Bill did if he donated £100m a year to transfers. But he doesn?t have that kind of money so he?s apparently a cunt.

The situation we are in is vastly superior to only 3 years ago, let alone 10 years ago, it just feels worse now because so many others clubs have new rich owners and we don?t.

And why? Because we aren?t even mid-table on so many investment points. The current board are doing their best to make us more appealing but it just isn?t that easy. Good luck to them...
Jason Lam
79   Posted 10/09/2008 at 02:41:10

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Firstly may I say the original article makes for excellent reading and very much thought provoking.

I only took accounting at uni so I’m not that much of an expert. I leave the household economics to the wife to which I should be credited for.

Anyway, from what I am reading, if our transfer ’war chest’ is mostly borrowed by guarantees of future income, then new streams of income i.e. DK would be required to convince the banks to continue lending to us, as whatever assets we have are probably all mortgaged off. Selling AJ at a profit may also paint us in good light in that Everton is a selling club making profit on players - so can we have more loans pls?

Maybe this is one reason why EFC is painting a beautiful picture of DK - to guarantee as much loans as possible from the banks - to spend today (or in January 2009).

My question is (pls excuse the stupidity), surely the banks would do auditing on their part to find the true value of DK regardless of how Fat Keith had painted it, as they are lending THEIR money to EFC? Taking into account economic factors, environmental, the lot etc. The amount of upfront loan money from the banks if and when DK get passed will give us a fair indication of how much the BANKING WORLD actually values DK. If we can’t trust EFC, LCC whatever, we can definately trust the banks as we all know they are the tightess arsed bastards walking the earth. Prudent accounting was it called? Or I am wrong in my thinking?

3pts at Stoke!

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