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.
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1 Posted 03/09/2008 at 07:44:06
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.
2 Posted 03/09/2008 at 07:53:42
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.
3 Posted 03/09/2008 at 07:46:42
Trouble is, football as an economy simply cannot sustain these kinds of crazy price levels. When the dam breaks, only time will tell.
4 Posted 03/09/2008 at 08:00:29
Thanks again Stephen
5 Posted 03/09/2008 at 08:26:04
6 Posted 03/09/2008 at 08:22:42
7 Posted 03/09/2008 at 08:29:29
8 Posted 03/09/2008 at 08:50:20
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.
9 Posted 03/09/2008 at 08:59:14
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?
10 Posted 03/09/2008 at 09:26:26
11 Posted 03/09/2008 at 09:31:29
Cheers for the taking the time!
12 Posted 03/09/2008 at 09:37:56
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.
13 Posted 03/09/2008 at 09:24:16
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.
14 Posted 03/09/2008 at 10:27:09
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?
15 Posted 03/09/2008 at 10:36:38
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?
16 Posted 03/09/2008 at 10:27:10
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!
17 Posted 03/09/2008 at 10:37:15
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.
18 Posted 03/09/2008 at 11:00:20
19 Posted 03/09/2008 at 10:54:15
20 Posted 03/09/2008 at 11:08:11
21 Posted 03/09/2008 at 11:17:38
22 Posted 03/09/2008 at 11:41:27
23 Posted 03/09/2008 at 11:46:58
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?
24 Posted 03/09/2008 at 12:02:17
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?
25 Posted 03/09/2008 at 12:06:08
Now that?s why I never liked him !! I shudder to think where the incest was going on :0)
26 Posted 03/09/2008 at 12:06:37
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.
27 Posted 03/09/2008 at 12:19:30
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.
28 Posted 03/09/2008 at 12:32:46
29 Posted 03/09/2008 at 13:00:00
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.
30 Posted 03/09/2008 at 12:58:14
31 Posted 03/09/2008 at 09:01:47
32 Posted 03/09/2008 at 13:44:13
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?
33 Posted 03/09/2008 at 14:35:05
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.
34 Posted 03/09/2008 at 14:59:58
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?
35 Posted 03/09/2008 at 15:24:30
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.
ALSO WE DON’T NEED A NEW STADIUM.
36 Posted 03/09/2008 at 15:42:42
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.
37 Posted 03/09/2008 at 16:22:40
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
39 Posted 03/09/2008 at 17:16:54
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.
40 Posted 03/09/2008 at 17:11:14
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.
41 Posted 03/09/2008 at 17:46:22
42 Posted 03/09/2008 at 17:54:45
43 Posted 03/09/2008 at 18:46:20
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.
44 Posted 03/09/2008 at 19:23:55
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
45 Posted 03/09/2008 at 19:15:03
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.
46 Posted 03/09/2008 at 19:45:51
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!
47 Posted 03/09/2008 at 20:36:59
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
48 Posted 03/09/2008 at 21:27:16
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.
49 Posted 03/09/2008 at 21:20:54
51 Posted 03/09/2008 at 22:21:28
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.
52 Posted 03/09/2008 at 22:17:37
53 Posted 03/09/2008 at 22:28:05
54 Posted 03/09/2008 at 21:41:24
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.
55 Posted 03/09/2008 at 22:35:23
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...
56 Posted 03/09/2008 at 22:56:58
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.
57 Posted 03/09/2008 at 23:19:42
58 Posted 03/09/2008 at 23:16:52
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.
59 Posted 03/09/2008 at 23:29:52
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?
60 Posted 04/09/2008 at 02:56:09
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?
61 Posted 04/09/2008 at 05:38:39
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...
62 Posted 04/09/2008 at 06:11:52
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!!!!!!!!
63 Posted 04/09/2008 at 08:59:10
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.
64 Posted 04/09/2008 at 09:03:36
65 Posted 04/09/2008 at 09:55:48
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.
66 Posted 04/09/2008 at 17:35:55
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?
67 Posted 04/09/2008 at 22:03:51
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?
68 Posted 04/09/2008 at 22:20:56
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.
69 Posted 05/09/2008 at 09:44:39
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?
70 Posted 05/09/2008 at 10:32:42
71 Posted 05/09/2008 at 11:48:04
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.
72 Posted 05/09/2008 at 12:30:39
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.
73 Posted 05/09/2008 at 16:26:43
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?
74 Posted 05/09/2008 at 23:16:57
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.
75 Posted 06/09/2008 at 10:09:51
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!!
76 Posted 08/09/2008 at 20:02:18
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.
77 Posted 08/09/2008 at 20:35:02
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.
78 Posted 09/09/2008 at 13:02:27
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...
79 Posted 10/09/2008 at 02:41:10
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!